ABCH deal turning banking sector green with envy
BANC-ABC

BancABC will benefit from the $100 million to be injected by Atlas Mara

Issuance of cautionary statements on the local bourse no longer convey the significance it once held in prior years.
The investment community more often than not is tempted to ignore such as most of them have suffered stillbirth or are simply renewed over a “very” long period of time with no tangible results.
Cases which come to mind relate to CFI, PG, Willdale and starafrica just to name a few. Against this background, when ABCH issued its cautionary statement on the March 25 2014, one would have been forgiven for ignoring such announcements due to the culture that has been built over the years.

The company nonetheless surprised the investment community as one week later, details of a huge investment deal was announced.
Corporates and policymakers may possibly take a cue from this huge investment deal which has been successful despite the country’s high sovereign risk profile.

ABCH announced on April 2 that Atlas Mara Co-Nvest Limited (Atlas Mara) was set to acquire its banking group (ABC Holdings) and its major shareholder African Development Corporation (ADC) in a US$265 million cash and shares deal.

Under the transaction, Atlas Mara — co-founded by former Barclays Plc’s chief executive Robert Diamond and Africa’s youngest millionaire Ashish Thakkar — will acquire BancABC’s shares in excess of 50,1 percent of total shares outstanding for $0,82 per share or the equivalent in the former’s shares.

Atlas Mara’s objective is to build a premier sub-Saharan financial services group through ABCH’s regional banking arm, BancABC.
In addition, it also intends to make a public share-for-share takeover offer for ADC’s 37 percent stake at an exchange ratio of 1,25 times Atlas Mara shares per ADC share.

This translates to an 88 percent shareholding after which the remaining 12 percent of BancABC shares will be acquired in a mandatory offer to minority shareholders at a price of $0,82 per share or the Atlas Mara share equivalent.

With Atlas Mara having highlighted that they will inject $100 million into BancABC operations subject to regulatory approval, the group will benefit immensely in terms of liquidity, capital and funding.

In addition, the calibre within Atlas Mara will also add further value to the group in terms of enhancing the competitive edge of BancABC in all the markets it operates.

New products, ideas and technological innovation especially on mobile banking will be some of the benefits for ABCH.
This is explained by the wealth of banking experience within Atlas Mara, starting with the knowledge and expertise of Robert Diamond regardless of the 2012 Libor scandal.

Ugandan billionaire Ashish Thakkar’s Mara Group, which has huge investments in technology, manufacturing and real estate interests in 19 African countries adds to the flavour.

Aside from Thakkar and Diamond, whose role at Barclays Capital included work on the bank’s African franchise, other non-executive directors include Tonye Cole, co-founder of West Africa-focused energy group Sahara, and Rachel Robbins, formerly general counsel for the International Finance Corporation (IFC).

The chairman Arnold Ekpe was former chief executive until 2012 of Togo-based pan-African group Ecobank, which has operations in more than 30 African countries as well as being an IFC investment in itself.

Although ABCH’s growth story in the medium-to-long term is possibly set on a new path in terms of growth and earnings, a few lessons can also be learnt.
The ability by the firm to attract such international investors despite the high country risk means corporate leaders can do something to attract capital rather than blaming the environment.

Hats off to the group chief executive Mr Douglas Munatsi and his team for the ability to unlock such a deal as most bankers and other executives in various sectors are quick to blame the Government for unfriendly business policies.

While it is true to a certain extent that lack of friendly policies has led to low inflows of foreign capital, business leaders can, however, make a difference by being proficient in their respective lines of businesses.

This is so because Atlas Mara was largely attracted by ABCH’s growth story since its formation including the geographical footprint built over the years.
NMBZ has been another institution that has been able to attract foreign investors in these trying times after lasts years’ US$14,9million capital raise.

All this highlights that irrespective of high country risk, companies may be able to raise capital through properly managing their own business operations.
Other banking institutions, especially indigenous and small players may take a cue from how ABC Holdings has grown through capital growth rather than abuse of depositors’ funds.

While acknowledging how ABCH has been put on the global limelight, caution must also be taken as ABCH’s business model only fell within Atlas Mara’s target.
The latter was mainly attracted by the diversity of ABCH through having a number of operations in various Southern African countries that is; Zambia, Mozambique, Tanzania, Botswana and Zimbabwe. Such a scenario somehow reflects a certain level of luck or coincidence by ABCH.

Without taking anything from the deal, had ABCH not been diversified in other countries, Atlas Mara would possibly not have invested or even focussed on the group. Although this may be a coincidence, the end result is likely to benefit all members (ABCH and Atlas Mara) as the union is hinged on the focus to achieve banking excellence.

This scenario is different from other marriages of conveniences that have been witnessed in Zimbabwe, which have not yielded positive results.
The FBCH and Turnall union after the debt-equity swap is one example where the latter is now recording losses due to lack of proper shareholder support particularly on the working capital aspect.

The Atlas Mara deal despite ABCH Holdings being domiciled in Botswana has also put Africa and also Zimbabwe on the international limelight.
Worth noting is that Atlas Mara also acquired recently 9,1 percent stake in Union Bank of Nigeria.
The bank (formerly Barclays Bank in Nigeria) regarded as the 14th largest bank in Africa has operated for nearly a century.

Union Bank represents one of the most attractive industry opportunities given its significant brand equity, robust client base and extensive retail infrastructure of about 400 branches.

This publicity is necessary as most shareholders in Atlas Mara are from the United States. Further to this, these investors may in the process re-consider Zimbabwe, which currently is capital-hungry and liquidity-strapped, which is now leading to weakness in aggregate demand and investment.

Thus policymakers may need to assist the corporate world by continuously creating an open and investor-friendly economy. Such policies may result in Zimbabwe being able to access capital even through bond issuances.

Overall, corporates may need to take a proactive approach in running their day-to-day businesses especially in an illiquid economy.
This entails strengthening their corporate governance structures, operating leaner cost structures and creating value to shareholders. The entrance by Atlas Mara may possibly result in the introduction of new technological products and an increase in competition also likely to benefit consumers.

Policymakers, especially at a time where there is low foreign capital inflows and gross capital formation may need to at least create a favourable environment for corporates to access capital. – FinX.

You Might Also Like

Comments

Take our Survey

We value your opinion! Take a moment to complete our survey