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Diamond, Access Bank merger creating value to banking sector

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The business combination of Access Bank and Diamond Bank Merger is expected to 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.

Since the reforms of the banking sector was introduced in 2005 in Nigeria, merger and acquisition become one of the ways of ensuring capitalization in the system.

That explains why when Access Bank Plc and Diamond Bank Plc, announced plans for merger, it did not take many analysts unaware, rather they believed it will create a robust governance structure and for the system.

And so as Nigerians await the completion of the ongoing merger transaction between Access Bank Plc and Diamond Bank Plc, the two Banks has continued to perform beyond analyst expectations.

Access Bank and Diamond Bank accounted for more than one-quarter of total turnover at the Nigerian equities market recently. The two commercial banks emerged the two most active stocks at the Nigerian Stock Exchange (NSE) with a turnover of 832.55 million shares valued at N3.26 billion shares in 2,569 deals, representing 29.4 per cent of the total turnover at the equities market.

Diamond Bank, which was believed to have more valuation premium, was the most active stock with a turnover of 548.21 million shares valued at N1.32 billion in 713 deals. Access Bank, the post-merger entity, followed with a turnover of 284.34 million shares worth N1.94 billion in 1,856 deals. Total turnover at the NSE stood at 2.83 billion shares worth N28.14 billion in 28,739 deals.

By March 5, 2019 meeting, shareholders are expected to consider and approve the scheme of merger for the combination of the two banks. The approval of the scheme by the shareholders is the final major hurdle in a series of approvals needed to consummate the merger.

The Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC) had earlier approved the scheme. Both CBN and SEC granted ‘Approval-in-Principle’ to the proposed scheme of merger after consideration of reports by parties to the transaction, leaving the decision to accept or reject the proposals to owners of the banks

The regulatory approvals had allowed the bank to proceed to the next stages of the business combination including obtaining an order of a Federal High Court to convene an extraordinary general meeting of shareholders for consideration of the proposed scheme, holding the court-ordered meeting of shareholders by each bank and the presentation of the approved scheme of merger to the Federal High Court for its sanction among others.

The Memorandum of Agreement and announcement of headline terms announced earlier by the banks had valued Diamond Bank at approximately NGN72.5 billion, about $200 million. The business combination will see Diamond Bank shareholders receiving N3.13 per share in cash and shares. Diamond Bank shareholders will receive a consideration comprising of N1.00 per share in cash and the allotment of two new Access Bank ordinary shares for every seven Diamond Bank ordinary shares held as at the implementation date.

The business combination is expected to 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. Access Bank will be the post-merger entity while its Managing Director, Herbert Wigwe will continue to lead the post-merger management as chief executive.

Access Bank plans to leverage the best talent of both banks and combine them to create a leading banking franchise in Nigeria. However, while the post-merger entity 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.

According to the banks, cost synergies conservatively estimated at N30 billion per annum, pre-tax, will be fully realised within three years post-completion while further revenue and balance sheet synergies will be evaluated by joint implementation committee.

The two banks outlined the competitive advantages of the merger. 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.

According to the Bank, Customers are at the heart of our decision to create one of Nigeria’s leading banks. ‘’The combination of Access Bank and Diamond Bank will result in real benefits. The products and services that Diamond Bank’s clients enjoy, including its commitment to digital innovation, will continue unchanged and will be backed by Access Bank’s own commitment to customers, financial inclusion and sustainability, and the bank’s corporate expertise and strong balance sheet’’.

‘’Together, we will bring the power of banking to millions across Nigeria, focused on speed, service and security. We are determined to ensure that both Access Bank and Diamond Bank customers will experience no disruption to normal banking services while we join forces to create Nigeria and Africa’s largest retail bank by customers. While there may be some changes in due course, we are committed to inform you ahead of time and in a way that is most convenient for you’’.

National Chairman, Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, called for calm amongst the investing community.

Okezie said, “If Diamond bank is operating 200 branches, considering the merger, Access bank will be a mega bank. I do not think there is any reason to panic as Access Bank is not new to the terrain, they know what they are doing and they must have done their homework to find out whether after the whole merger thing is done, they will still remain solid,

Also speaking, Head, Retail Banking, Diamond Bank Plc, Robert Giles while assuring Nigerians that the merger between Diamond and Access bank will bring the best of strong core print in treasury platform as well as the best of retail banking, noted that uique products such as Diamond Xtra, Xclusive Plus, High Interest Deposit Account (HIDA), Diamond Business Advantage (DBA) and Diamond Beta will remain even after the merger is completed.

Diamond Bank has a strong retail franchise especially on the liability side giving it the lowest funding cost among peers. A merger with Access Bank, which still has a relatively high funding cost will help the bank grow low cost liquidity base.

 

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