Unity Bank Plc, in which the Asset Management Corporation of Nigeria (AMCON) – the government agency established to buy bad loans from banks – is the top shareholder, will meet shareholders this month to secure approval for a business combination with Providus Bank.
The transaction reached that decisive phase after the Federal High Court in Lagos asked the small-tier lender in July to present the scheme of merger to shareholders, a court document posted by the Nigerian Exchange showed on Tuesday.
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Unity Bank is seeking a resolution “That the merger of all the assets, liabilities and undertakings, including real properties, and intellectual property rights of the Bank with that of Providus Bank Limited, upon the terms and subject to the conditions set out in the Scheme Document, be and is hereby approved without any further act or deed.”
It also needs to reach an understanding with shareholders “That all legal proceedings, claims and litigation matters pending or contemplated by or against the Bank be continued by or against Providus Bank Limited after the Scheme is sanctioned by the Court,” the document stated.
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The surviving bank will run as Providus, whose certificate of incorporation will continue to be valid thereafter.
One major legal hurdle the meeting holding on 26 September aims to scale is Unity Bank shareholders’ assent to a proposal that they each be paid N3.18 in exchange for every share held in compliance with the terms of the scheme. In the alternative, they may opt to receive 18 ordinary shares in Providus (credited as fully paid) for every 17 ordinary shares of Unity Bank.
The document is silent on how that will work, given that Unity Bank is publicly listed in Lagos, while Providus so far is privately held. The arrangement offering shareholders the choice of substituting shares in Unity Bank for those of the other lender can only be effective where the common stock of Providus is listed and tradeable on a bourse as a quoted company.
The N3.18 buyout share price is a 110.6 per cent premium on the bank’s current share price of N1.51.
Last August, the Central Bank of Nigeria (CBN) endorsed a financial accommodation to support the planned merger, saying the “strategic move is designed to bolster the stability of Nigeria’s financial system and avert potential systemic risks.”
The is essential in addressing the bank’s total obligations to the CBN and other stakeholders, the regulator added.
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S & P Global expects the ongoing recapitalisation of banks in Nigeria to trigger mergers among small-tier banks. Analysts say increased business combination activities are likely to be witnessed at the start of next year.
AMCON holds a 34.2 per cent interest in Unity Bank. The lender reported an after-tax loss of N62.6 billion for the 2023 financial year, according to its latest audited financials, after a N50.4 billion FX loss battered earnings.
Total assets shrank to N472.6 billion as of December 2023 from N510.1 billion a year earlier.
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