CBN okays Access, Diamond merger

THE Central Bank of Nigeria (CBN) has given a “No Objection” nod
to the merger plans of Access Bank Plc and Diamond Bank Plc, the
boards of both banks said yesterday.

The deal is expected to be completed in the first half of 2019.
Transaction completion is subject to Access Bank and Diamond Bank
obtaining shareholder and regulatory approvals (CBN, the Securities
and Exchange Commission (SEC), 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 N72.5 billion (about $200 million) and will see
Diamond Bank shareholders receive N3.13 per share in cash and
shares, Access Bank and Diamond Bank are announcing further
details, including the rationale and benefits of the deal, the
estimated cost synergies, the capital management plan and the
timetable.

The 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.

It will bring also 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.

The transaction will be concluded via Scheme of Merger following
Access Bank and Diamond Bank Court Ordered Meetings billed for
March 2019 to approve terms. Subject to shareholder approvals,
final approvals by SEC, CBN and PenCom regulatory and FHC sanction
are expected before the end of first half of next year.

Cost of synergies conservatively estimated at N30 billion per
annum, pre-tax, to be fully realised within three years
post-completion.

Further revenue and balance sheet synergies are 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, both banks expect to
achieve a post-completion Capital Adequacy Ratio (“CAR”) of 20 per
cent at the bank level and 22 per cent 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 finalised terms and obtained regulatory
approvals for a Tier II capital issuance, which will raise $250
million, available for drawdown in January 2019.

Commenting on the proposed merger, Access Bank’s Chief Executive
Officer (CEO) Herbert Wigwe 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 per cent
following completion of the merger, which will be a leading
competitor in all the markets in which it operates.”

Diamond Bank’s CEO Uzoma Dozie 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.

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