Saving Nigeria’s Diamond Nation

Saving Nigeria’s Diamond Nation

Today, I received many questions from entrepreneurs and businesspeople asking what happened on Diamond Bank which announced that Access Bank had acquired (yes, “merger” with) it. It was HARD news because many fellow citizens would possibly see dislocations in their careers. I spent time thinking about a business card an auto shop mechanic gave me last week when I visited to change car oil: McKenzie’s – since 1957.

The Board of Diamond Bank Plc (“Diamond Bank”) today announces that following a strategic review leading to a competitive process, the Board has selected Access Bank Plc (“Access Bank”) as the preferred bidder with respect to a potential merger of the two banks (“the merger”) that will create Nigeria and Africa’s largest retail bank by customers.

The Board of Diamond Bank believes that the merger is in the best interest of all stakeholders including, employees, customers, depositors and shareholders and has agreed to recommend the offer to Diamond Bank’s shareholders. Completion of the merger is subject to certain shareholder and regulatory approvals.

The proposed merger would involve Access Bank acquiring the entire issued share capital of Diamond Bank in exchange for a combination of cash and shares in Access Bank via a Scheme of Merger. Based on the agreement reached by the Boards of the two financial institutions, Diamond Bank shareholders will receive a consideration of N3.13 per share, comprising of N1.00 per share in cash and the allotment of 2 New Access Bank ordinary shares for every 7 Diamond Bank ordinary shares held as at the Implementation Date. The offer represents a premium of 260% to the closing market price of N0.87 per share of Diamond Bank on the Nigerian Stock Exchange (“NSE”) as of December 13, 2018, the date of the final binding offer.

Immediately following completion of the merger, Diamond Bank would be absorbed into Access Bank and it will cease to exist under Nigerian law. The current listing of Diamond Bank’s shares on the NSE and the listing of Diamond Bank’s global depositary receipts on the London Stock Exchange will be canceled, upon the merger becoming effective.

Diamond Bank expects the transaction to complete in the first half of 2019.

Uzoma Dozie, the Chief Executive Officer of Diamond Bank, said: “The proposed combination with Access Bank will create one of Africa’s leading financial institutions.  There is a clear strategic rationale for the proposed merger and strong complementarities between the two institutions. While Diamond Bank has pioneered Nigeria’s largest technology-led retail banking platform, Access Bank is one of Nigeria’s leading full-service commercial banks. Consolidation in the Nigerian banking industry is an inevitable, natural progression in a sector where the gap between Tier 1 and Tier 2 banks has been widening and scale has become critical; where technology will disrupt the traditional business model while enabling broader financial inclusion. 

The board of Diamond Bank believes that the proposed combination of the two operations provides an exciting prospect for all stakeholders in both businesses and will create a financial institution with the scale, strength, and expertise to capitalise on the significant opportunities in Nigeria and sub-Saharan Africa more broadly.”

Herbert Wigwe, CEO of Access Bank, said: “Access Bank has a strong track record of acquisition and integration and has a clear growth strategy. Access Bank and Diamond Bank have complementary operations and similar values, and a merger with Diamond Bank, with its leadership in digital and mobile-led retail banking, could accelerate our strategy as a significant corporate and retail bank in Nigeria and a Pan-African financial services champion. Access Bank has a strong financial profile with attractive returns and a robust capital position with 20.1% CAR as at 30 September 2018. We believe that this platform, together with the two banks’ shared focus on innovation, financial inclusion, and sustainability, can bring benefits to Access Bank and Diamond Bank customers, staff and shareholders.”
Exotix Capital acted as international financial advisor to Diamond Bank, and Templars acted as Nigerian legal counsel.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU 596/2014) (“MAR”) and is disclosed in accordance with Diamond Bank’s obligations under Article 17 of MAR.

Yes, a mechanic oil change shop was founded in 1957 in America and it is still operating. But in Nigeria, our companies rarely pass the 40th birthday. For every First Bank, hundreds did not see the 40th year. And if you remove the foreign-anchored companies in Nigeria, we may not have more than 25 companies with revenue of $5m that are above 40 years. Remember, Dangote, GTBank, Innoson Motors, and many more are not there yet. In short, if you sort companies by “40th birthday” in the Nigerian Stock Exchange, and carefully remove entities with international origins, you may struggle for two dozens.

No matter how you see it – our problems are NO MORE building startups but keeping old companies alive. This is not really about creative destruction. This is a systemic problem in Nigeria.  It is very important that government begins to look at this paralysis with the same high voltage searchlights they are beaming for seeding  startups.

If the problems are regulations, we need to find out. If the problems are that our accountants, business leaders, and others in the ecosystems are sleeping on their jobs, Nigeria needs answers. I do not think it makes sense to invest millions of dollars to create companies and they just die!

We need to be unhappy that many companies are dying in a growth market like Nigeria. Our business and political leaders have jobs to do: we cannot transmute with these failures into the next level as a nation.

Comment  on LinkedIn Feed

The problem is fundamental, unfortunately many people do not see beyond their noses. Have we wondered why the Missionaries that brought western education to us were building churches and schools closely? Because you first need to be HUMAN, before becoming a professional or anything else.

Having ten degrees and certifications does not stop anyone from being fraudulent, unethical or suffering moral crisis; these are the real issues. Skills don’t equate nobility. We have wasted so much time sending people to school, without building their minds and training the souls; so we end up having ‘educated’ monsters and people with contrived and warped minds.

Great businesses aren’t built by setting out to amass fortune; rip people off; game the system whenever you have an inch; we must focus on producing humans who are humane, we are greatly lacking in this department.

We have a beautiful phrase known as ‘Corporate Governance’, but the unfortunate thing is that both the players and regulators are suffering from the same moral crisis, so it becomes extremely difficult to ask anyone to lead the charge.

Our values are questionable and dubious, to build durable companies or stop the demise of the existing ones; this is where to start.

Share this post

5 thoughts on “Saving Nigeria’s Diamond Nation

  1. “No matter how you see it – our problems are NO MORE building startups but keeping old companies alive.”

    This sums it up for me. I think the many start up incubator/accelerator programs and other entrepreneurship facilitators should begin to really emphasize this point to young entrepreneurs. It’s something that isn’t really emphasized. It’s so far been more about survival, finding product/market fit and growing profits over time. But come to think about it, what’s the real benefit of being around for so long anyway?

    Reply
    1. “But come to think about it, what’s the real benefit of being around for so long anyway?” The fact remains that older and more matured firms have the capital and experience to do BIGGER things in any economy. I do not expect a startup which raised $20k to finance anything useful but I count on First Bank to help. We need both – the challenge here is that we do not have older firms.

      Reply
  2. It is not just how long but how well the company has grown over that 100 years. The British take great pride in a mum and pop shop that existed over 300 years and is still a neighbourhood shop but Americans have a different mentality. It will be good if Nigerian business leaders have a long term sustainable growth strategy that will weather any storm that is very common in very volatile economies like Nigeria.

    Reply
  3. I agree with Ndubuisi. We need to save our old companies as we are trying to start new ones in Nigeria. In the Banking Industry in Nigeria, WEMA Bank (which started in 1945) is about the only fully indigenous, and longest standing, bank in Nigeria. We should support our old companies to not only survive, but thrive and transform to meet the current needs of our growing consumer base, especially young people.

    Reply

Post Comment