Access Bank And Diamond Bank Detail Proposed Merger To Create Nigeria And Africa’s Largest Retail Bank By Customers

The Boards of Access Bank Plc (“Access Bank”) and Diamond Bank
Plc (“Diamond Bank”) today announce that they have received “No
Objection” from the Central Bank of Nigeria (“CBN”) regarding a
potential merger between the two banks, which is expected to
complete in the first half of 2019. Transaction completion is
subject to Access Bank and Diamond Bank obtaining shareholder and
regulatory approvals (Central Bank of Nigeria, the Securities and
Exchange Commission, the Federal High Court (“FHC”) and the
National Pension Commission (“PenCom”).

Following the signing of the Memorandum of Agreement and
announcement of headline terms, which valued Diamond Bank at
approximately NGN72.5 billion (~$200m) and will see Diamond Bank
shareholders receive NGN3.13 per share in cash and shares, Access
Bank and Diamond Bank are today announcing further details,
including the rationale and benefits of the deal, the estimated
cost synergies, the capital management plan and the timetable.

• Merger will form a leading Tier 1 Nigerian bank and the largest
  bank in Africa by number of customers, spanning three continents,
  12 countries and 29 million clients.
• Brings together treasury, risk management and corporate banking
  expertise with strong retail and digital banking capabilities to
  create a financial institution operating across the full suite of
  products for all customer segments.
• Transaction to be concluded via Scheme of Merger following
  Access Bank and Diamond Bank Court Ordered Meetings expected in
  March 2019 to approve terms. Subject to shareholder approvals,
  final SEC, CBN, and PenCom regulatory approvals and FHC sanction
  expected before end of H1 2019.
• Cost synergies conservatively estimated at NGN30 billion per
  annum, pre-tax, to be fully realised within three years
  post-completion. Further revenue and balance sheet synergies to be
  evaluated by joint implementation committee.

The pro-forma capital position of the merged bank will be in
full compliance with regulatory requirements for significant
financial institutions with an international banking presence.
However, in order to meet international standards of best practice
and ensure a robust capital buffer, Access Bank and Diamond Bank
have jointly agreed a strategic capital management plan and expect
to achieve a post-completion Capital Adequacy Ratio (“CAR”) of 20%
at the Bank level and 22% at the Group level. The key elements
are:

• Diamond Bank to take further impairments in line with IFRS9, to
  be reflected in year end 2018 results.
• Access Bank has already finalised terms and obtained regulatory
  approvals for a Tier II capital issuance, which will raise US$250
  million, available for drawdown in January 2019.
• Access Bank has also obtained “No Objection” from the CBN to
  undertake a Rights Issue to raise up to NGN 75 billion (~US$ 207
  million) in H1 2019. Shareholder approvals and other regulatory
  approvals will be obtained before the offer opens. This accelerates
  the capital management plan to support retail growth, previously
  set out in the Bank’s five-year strategy

Commenting on the proposed merger, Herbert Wigwe, CEO of Access
Bank, said: “I am delighted to announce that we have received
the necessary regulatory approvals to pursue a merger with Diamond
Bank, one of Nigeria’s foremost digital and retail banks, subject
to final regulatory and shareholder approvals. The combination of
our two businesses will create the largest retail bank in Africa by
customer base and a very significant player in the Nigerian
market.  This is a huge step towards the delivery of our goal
to bring the power of banking to millions of people across Nigeria
and an exciting transaction for Access Bank and Diamond Bank’s
customers, staff and shareholders. 

“We have a clear plan to maintain our capital strength and
are announcing today decisive steps by both banks to ensure their
financial stability throughout the process. The overall outcome
will be a stable institution with an extremely strong capital
adequacy ratio of more than 20% following completion of the merger,
which will be a leading competitor in all the markets in which it
operates.

“Access Bank and Diamond Bank have complementary operating
platforms and similar values, and a merger with Diamond Bank, with
its leadership in digital and mobile-led retail banking, will
accelerate our ambition to become a leading corporate and retail
bank in Nigeria and a Pan-African financial services champion. We
look forward to bringing our discussions to a successful conclusion
and delivering the benefits of the merger to our staff, customers,
shareholders and other stakeholders.”

Uzoma Dozie, CEO of Diamond Bank, said: “The merger is
positive for all of Diamond Bank stakeholders, including customers,
employees and shareholders. In particular, customers will benefit
significantly through the unrivalled combination of the best of
Diamond Bank’s retail and digital leadership with the size of
Access Bank’s balance sheet, corporate names and geographical
reach.

“In reaching this decision, the shared passion for
leveraging Nigeria’s youthful and entrepreneurial talent, and a
commitment to better outcomes through financial inclusion have
convinced us that this is the right combination.

“I believe that the combination of two strong and admired
brands, with shared values and complementary strengths, will be a
strong force for positive change in the Nigerian and African retail
landscape. As a result, this merger creates significant potential
for sustainable long-term growth which stands to benefit customers,
employees and shareholders alike.”

Rationale for and benefits of the
transaction

Diamond Bank will benefit from Access Bank’s strong culture of
risk and capital management expertise and a clear strategy for
sustainable growth. Access Bank will take advantage of Diamond
Bank’s unparalleled retail banking expertise and strong digital
offering. Together, the two companies would create one of Nigeria’s
leading banks, with 29 million customers, including more than 13
million mobile customers, as well as 3,100 ATMs and around 32,000
PoS terminals.

Diamond Bank and Access Bank share many of the same areas of
focus, including women, youth, entrepreneurs and the financially
excluded and will be able to further develop their positioning and
market leadership in these growth sectors. Diamond Bank’s corporate
customers will also be able to benefit directly from Access Bank’s
corporate expertise in trade finance, cash management, treasury and
corporate finance.

Diamond Bank currently has 19 million customers, including 10
million mobile users. The combined operation will have
relationships with both MTN and Airtel, ensuring that customers of
the merged bank will continue to access a strong mobile banking
proposition. Access Bank and Diamond Bank also operate from the
same technology platform, which the Boards believe will enable them
to complete the integration with minimal disruption or impact on
customers, in addition to generating significant synergies.

Strong financial profile

Access Bank had a capital adequacy ratio of 20.1% as at 30
September 2018. It is currently concluding a US$250m Tier II
capital raising exercise in line with its capital plan to provide a
robust capital buffer given the current macro-economic
environment.

The Board of Diamond Bank has confirmed to Access Bank that it
intends to take a further impairment on its loan book in line with
its IFRS 9 implementation by its financial year end on 31 December
2018. Access Bank has sufficient capital headroom to conclude its
merger with Diamond Bank after the write down.

The pro-forma CAR of the combined entity will be in full
compliance with regulatory requirements at the time of completion.
However, Access Bank has also accelerated its capital plan, in
which it had anticipated raising additional capital to fund retail
expansion, to ensure that the quantum and timing take account of
the planned merger.  It has obtained a CBN “No Objection” for
a Rights Issue of up to NGN75 billion (~US$207 million) to be
launched in H1 2019, which will ensure that it continues to
maintain a strong capital buffer above the minimum requirements. A
formal notification for an EGM to seek shareholder approval for the
rights issue will be issued shortly.

The transaction also presents the opportunity for significant
cost synergies to be derived from consolidation of support
functions and processes, the benefits of scale, branch
consolidation and HQ centralisation. These are conservatively
estimated to be NGN30 billion per annum, pre-tax, to be fully
realised three years post-completion.

In addition, there are revenue synergies, such as those from the
opportunities created by applying Access Bank’s value chain
approach to Diamond Bank’s existing 19 million-strong customer
base, along with the positive impact of Diamond Bank’s NGN1
trillion low cost deposit base on Access Bank’s cost of funding,
enhanced risk management and yield and price improvements driven by
market share. The funding and capital synergies are also
attractive, with an improved deposit mix, improved access to
capital markets and greater efficiency in treasury operations.

A Joint Implementation and Integration Committee has been
established to ensure that these synergies are properly evaluated
and the resulting profit and growth potential realised.

Management and integration

Access Bank plans to leverage the best talent of both banks and
combine them to create a leading banking franchise in Nigeria. The
combined bank will be led by Access Bank’s current CEO, Herbert
Wigwe, and will retain the Access Bank name. It is intended that
the brand will be redesigned to include strong elements of Diamond
Bank’s digital and retail brand.

Access Bank has a strong track record of M&A in Nigerian
banking and has previously demonstrated its integration
capabilities in the successful acquisition and subsequent
absorption of six institutions in the past 15 years. The same team
who led this successful integration will be responsible for
delivering the merger with Diamond Bank and overseeing the
transition to the enlarged entity.

Proposed timetable

The following sets out the envisaged timetable for completion
and associated shareholder and regulatory approvals. The Boards of
Access Bank and Diamond Bank reserve the right to change the
timetable if transaction exigencies require.

Key numbers

Citigroup Global Markets Limited and Chapel Hill Denham
Advisory Limited acted as Financial Advisers to Access Bank while
Banwo & Ighodalo acted as Legal Adviser to Access
Bank.

Exotix Capital acted as financial adviser to Diamond
Bank and Templars acted as Legal Adviser to Diamond
Bank.

About the deal

www.growingaccess.com^[1]

About Access Bank

Access Bank is a full service commercial bank operating through
branches and service outlets located in major centres primarily
across Nigeria and sub-Saharan Africa, as well as the United
Kingdom (extension to United Arab Emirates (Dubai)), with
representative offices in China, Lebanon, and India. The Group
provides a wide range of banking and other financial services to
over 9 million customers from 392 branches and service centres.

Listed on the Nigerian Stock Exchange in 1998, the Bank serves
its various markets through four business segments: Personal,
Business, Commercial and Corporate & Investment Banking. The Bank
has over 830,000 shareholders including several Nigerian and
International Institutional Investors and has enjoyed what is
arguably Africa’s most successful banking growth trajectory in the
last twelve years ranking amongst Africa’s top 20 banks by total
assets and capital since 2015.

As part of its continued growth strategy, Access Bank is focused
on mainstreaming sustainable business practices into its
operations. The Bank strives to deliver sustainable economic growth
that is profitable, environmentally responsible and socially
relevant.

www.accessbankplc.com^[2]

About Diamond Bank

Diamond Bank is one of Nigeria’s leading retail banks, committed
to providing innovative customer-centric solutions. The bank offers
a full range of banking products and services in retail, business
and corporate banking segments. The bank took part in a highly
successful Private Placement share offer before going public with
an IPO in 2005.

Through innovation and technology, Diamond Bank enhances
customer experiences and drives financial inclusion through what it
calls ‘Beyond Banking’. Diamond Bank’s digitally-focused
proposition is closely aligned to Nigerian lifestyle and consumer
trends. Diamond has sought to position itself for long term growth
by leveraging Nigeria’s strong fundamentals, including a large
underbanked population and Africa’s biggest economy.

www.diamondbank.com^[3]

Culled from Nairametrics^[4]

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