As months of speculations on the state of affairs for Diamond Bank were laid to rest earlier today, the terms of “acquisition” by Access Bank or “merger” as the banks are preferring to call it has been dubbed a “win-win” situation by most financial analysts.
Access Bank and Diamond Bank Monday filed regulatory notices on the Nigerian Stock Exchange (NSE), explaining that the entire issued share capital of Diamond Bank will be acquired by Access Bank.
Access Bank will pay Diamond Bank’s shareholders N1/share plus 2 units of Access bank shares for every 7 units of Diamond bank shares, details of the deal outlined.
“For illustration sake, if you had 10,000 units of Diamond Bank shares, you will receive N10,000 cash and and 2,857 units of Access Bank shares (which is worth about N20,000 at N7/share of Access at Market)” explained Abby Kerry, a financial analyst.
Diamond and Access Bank shares consequently emerged the best performing stocks for the day with a 9.5 percent and 9.4 percent share price appreciation respectively. The top traded stock by volume was also Diamond Bank (71.0m units) as investors reacted to the merger/acquisition news.
According to Uche Uwaleke, a banking, finance and capital market professor at the Nasarawa State University, Keffi, the recent merger (it is in effect an acquisition) between Access bank and Diamond bank is a welcome development for the banking industry in Nigeria.
“Given the strengths of the two banks, there is little doubt that the union involving Access bank’s strong fundamentals with CAR of over 20 percent and Diamond bank’s digital-driven services will produce synergies that will be positive for financial inclusion in Nigeria,” Uwaleke in an explanation of the situation to business a.m’s correspondent noted.
He said by this merger, Access bank has emerged as one of the biggest banks in Africa by customer base.
“The scheme of merger is a win-win for the shareholders of the two banks. The purchase consideration is fantastic at over N3 per share for a target bank whose share price is less than N1 per share,” he said.
As part of the purchase consideration, the offer of 2 shares for every 7 shares of the target bank is a fair deal. Little wonder, the shares of Diamond bank is now very much sought after by investors and are currently on bid. It is important to note that what is playing out here is different from the case of the defunct Skye bank which was taken over by Polaris, owing to protracted ill- health, Uwaleke further noted.
He said, while the bridge bank arrangement involved huge cost on the part of the CBN, the case of Access and Diamond banks is clearly a marriage between two consenting adults requiring only approval by the regulatory authorities.
It does not matter if one partner is stronger than the other. So, it does not call for any panic on the part of either the customers, employees, creditors, shareholders or the public.
The banking structure in Nigeria, like in many other countries of the world, is oligopolistic in nature and so mergers and acquisitions should be expected to continue to shape the financial landscape for good especially in a highly competitive environment where the gap between tier 1 and tier 2 banks is widening by the day.”