Saturday, April 19, 2014

Nigeria Stock Exchange to suspend UBA shares Thursday

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United Bank for Africa

UBA will split in four parts and shareholders will choose which of the constituents to re-invest in.

The shares of one of Nigeria’s largest banks, United Bank for Africa, UBA, will be placed on suspension from the stock exchange from Thursday, January 3.

The bank will also be split into four entities, following its decision to restructure, leaving shareholders to decide which of the entities they wish to re-invest in.

Shareholders of the bank recently approved its restructuring in compliance with the Central Bank of Nigeria’s policy on universal banking.

The restructuring plan will see UBA split into four entities.

The first is UBA Plc, which comprises of its Nigeria bank, all African banking subsidiaries (18), UBA Pension Custodians, UBA FX Mart and UBA Capital Europe.

The second entity, UBA Capital Plc, is made up of UBA Asset Management, UBA Trustees, UBA Metropolitan Insurance, UBA Stockbrokers, UBA Insurance Brokers, and UBA Nominees.

The third and fourth are African Prudential Registrars Plc and Afriland Properties Plc.

The bank’s scheme document, dated November 15, reveals that UBA’s shares will be placed on full suspension on January 3, while the indicative date for the listing of UBA Capital and African Prudential Registrars on the Nigerian Stock Exchange, NSE, is scheduled for January 11.

This transaction is such that the capital of each entity – second to the fourth — will be allotted to eligible shareholders of UBA proportionately, making them 100 per cent owners.

However, Afriland Properties will be listed at a yet-to-be-disclosed date.

The bank’s shareholders have the option to sell their allotted shares to other interested shareholders within a 7-day period, according to finance experts, starting from 02 January 2013 - indicative date from Scheme document – or sell at a future date via UBA Stockbrokers, or sell when it is listed in future. Renaissance Capital, an Investment Bank said the implications for UBA shareholders today is neutral.

“As the scheme document states, from the N170bn capital of UBA in Financial Year 2011 (FY11), N3.31bn will be redistributed to UBA Capital and N2.5bn to Afriland Properties Plc – this represents just 3 per cent of the group’s capital in FY11.

“As such, there will be no capital redistribution to the registrar business which was sufficiently capitalised as at FY11″ the firm said, in a document analysing the bank’s restructuring.

The valuation date for this restructuring is August 31, 2012 and share price was NGN4.52.

“Basically, for every 33 shares held in UBA Plc, eligible shareholders will receive 4 ordinary shares in UBA Capital Plc, 1 ordinary share in Africa Prudential Registrars Plc, 1 ordinary share in Afriland Properties Plc in the post-restructure successor companies and all fractional shares that remain shall be allotted to eligible shareholders to the nearest whole number,” Renaissance Capital said.

Adesoji Solanke, a Bank Analyst at Renaissance Capital, said the impact of this transaction on existing UBA shareholders is limited.

“The commercial banking assets being retained under the restructured UBA Plc represent 97 per cent of equity. In FY11, cumulative profits of the UBA Capital entities was N1.6bn while that of Africa Prudential Registrars was N188mn.

“Afriland Properties is a new entity, so no operational financials for FY11. Given that these entities are relatively small, we think the focus should remain on UBA the bank. We still see good value in UBA at these levels and retain our BUY recommendation” he said.

“The question we think, is what should shareholders do with the new entities? We are not convinced that the UBA Capital and the Registrars business should trade at the same multiple as the commercial banking asset,” he added.

According to him, not only are these businesses small, “but additionally it is unclear, in our opinion, if these entities have a viable competitive advantage as standalone businesses”.

“Afriland Properties is even less compelling at this point. It has no operational history and the scheme document provides very little detail on the list of properties that have been transferred to this entity.

“Additionally, there is no stated deadline for the listing of this entity on the NSE so a liquidity discount to the above valuation may be warranted,” Mr. Solanke said.

“For shareholders reluctant to hold unlisted instruments, we would recommend taking the cash offer and reinvesting proceeds into UBA Plc, the commercial banking entity” he said.

A number of banks have already divested their investments in line with the Central Bank’s directive. Diamond Bank, GTB, Skye Bank, First Bank and Stanbic IBTC made their divestments last year.

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