Tag: Mergers

  • Coalitions, mergers and defections: It’s all politics

    Coalitions, mergers and defections: It’s all politics

    The next Nigerian general election is less than two years away. Barring any shifts or cancellations, Nigerians are expected to go to the polls by February 2027 to elect a president, governors in majority of the states (post-election litigations had altered some state governors’ elections to off-season) and state and federal legislators. The political environment is hitting up giving vent to the cliché saying that, “politicians always  think of the next elections”.

    The Nigerian democracy is fashioned after the American model (but I dare say to the extent that the politicians in Nigeria find very expedient). The Nigerian political party system allows for dozens of political parties. The American political party system is clearly a two party system even if there are the less popular smaller parties that have not made great inroads electorally.

    The two popular parties, the Republican and Democratic parties are deeply ideologically based. Despite their marked differences, they often agree on some national policies when it is in the interest of the American people. Even though policy routes might differ sometimes, they often hold dear American national interests especially in global politics. The Republican and Democratic parties are run under strict constitutional guidelines. Party leaderships are  not based of financial capacity and their roles are often purely administrative.

    The Nigerian political system is such that the structure seems so flawed that it would appear there are neither strict adherence to both party and the national constitutions nor a strong adherence to laws. This seems to be the core reason for the level of indiscipline often displayed by some influential members of most political parties at ward, state and national levels. There is clearly no strict ideological identities of political parties in Nigeria. This is reason why politicians easily oscillate (often euphemistically referred to as defections) from one political party to the other. In fact, the late former Senate President, Chuba Okadigbo, a renowned political scientist had once referred to the Nigerian so called political parties as mere gatherings of people.

    READ ALSO: The Tinubu administration and its malcontents (2)

    The Independent National Electoral Commission (INEC) had to deregister some political parties because some of them did not meet the electoral benchmarks to continue in the process. Recently too, it does appear that more than a hundred political parties are seeking registration with INEC. This fact says a lot about Nigerian political party system. Between the  mere gathering of people who are often strange bedfellows politically and socially and functionality of the democratic system in Nigeria is often some blurred lines.

    One fairly good outcome of the former military ruler, Ibrahim Babangida’s lengthy transition period was obviously his insistence on just two political parties, the National Republican Convention (NRC) and the Social Democratic Party (SDP). That system seemingly brought a bit of order and cohesion within the political party structure. It helped the Nigerian political system as it helped in uniting the country politically. That system produced what is now celebrated as the best, freest and fairest election in Nigeria’s history. It blurred the tribal, ethnic and religious lines often drawn by politicians for their personal expediencies.

    So as the 2027 general election draws near, the Roundtable Conversation is calmly observing the usual macabre dance in the Nigerian political field. There have been a continual defection of politicians mainly from the seemingly opposition Peoples democratic Party (PDP) and the 2023 revitalized Labour Party (LP) aand other inconsequential political parties to the ruling All Progressives Congress (APC). Despite the Supreme Court’s verdict about the consequences of defections from one party to the other after winning elections, Nigerian politicians through their actions sometimes say in very loud terms, “the Supreme Court can give verdicts but we can do what we like”.

    Even though this disobedience of the Supreme Court ruling happens most of the time with no consequences, it is a loud verdict on the discipline of the Nigerian political class. It stands as a bold example of why Nigerian democracy seems to appear very unweanable and  earns the delusional tag of ‘a nascent democracy’.  No nation that has chosen democracy as a system of government can continue to toy with wobbly political culture and make progress.

    A close scrutiny of the average politician’s attitude in politics shows a lot of hypocrisy. The lack of ideological leaning and the indiscipline of oscillating from one political party to the other is often euphemistically explained as a power granted by the constitution for freedom of choice, free speech and gathering. The kind of cherry-picking that doesn’t apply when they refuse to be held accountable, when they disobey  their own party and national constitutions and the Supreme Court of the land.

    While analysis go on and on about formation of new political parties, defections to or from the ruling APC, PDP, Labour or SDP, one thing remains clear, there is an ominous sign to Nigeria’s democracy. Professional politician as they exist in Nigeria is not good for democracy. It is sad that most politicians in Nigeria describe themselves as ‘professional politicians’. On the face of it, it sounds comical but with a deeper look, it portends grave danger for development. There seems to be a preponderance of individuals whose only means of livelihood comes from the ‘spoils’ of office and politicking.

    The late Ojukwu once defined most politicians as individuals with no second addresses. By this he meant those who introduce themselves as ‘professional politicians’. They often lack the discipline of occupational achievers. They eran their every dime and influence from playing politics and in most cases, they are in it not to improve the welfare of the people but for what they can get election after election. There is hardly any developmental initiative, vision for the future of the country or worries about the state of the ordinary people who are the main reason for governance in the first place.

    Nigerian elite has a role to play in redirecting the course of our democracy. It is not enough to sit back and sneer at the things happening in our political space. The essence of education, knowledge and exposure is the value it brings to the lives of others. Iconic individuals and legends in the world earned their legendry accolades for their civil and political activism that impacted others beyond thei generations. Late Nnamdi Azikiwe, Chief Obafemi Awolowo, Alhaji Abubakar Tafawa Balewa, Mandela, Ghandi, Martin Luther King, Patrice Mulumba, Queen Amina, Moremi, Queen Idia and countless others earned their immortality through acts that edify humanity.

    As we watch the drama in the political field, the scramble for registrations and the harvest of inter party defections at a time most politicians ought to be held accountable is as tragic as it as laughable. In the 26 years return to democracy, there are more people in the poverty bracket that even India with its more than a billion population has left Nigeria in the poverty bracket. There are more than 133million people living in multidimensional poverty, Nigeria has more out of school children than some five countries’ population, there are more chronically malnourished kids than some country’s entire population.

    Nigeria might be raising a generation of mentally and physically retarded children whose future miht be altered by their developmental deficiencies which ultimately impacts productivity. Do our politicians take stock at all? Do they care for the future? Do they care for legacies beyond bank balance and property and notoriety? It is a sad commentary that most politicians only see themselves in the mirror of life. Nothing matters except their advantageous political positioning.

    Beyond the political party intrigues, who cares about the structure of these political parties as enduring legacies that can enhance the Nigerian democracy for the children yet unborn. The irony and hypocrisy of politicians at campaign podiums is that the same puerile rhetoric keeps being regurgitated with no serious thought about walking the talk post elections. Why do most state governors hide under the federal government instead of taking their constitutional roles beyond white elephant projects  that often have no direct impact on the people? The basic needs of food, shelter and health have not really been prioritized. Political expedient but low impact projects are often over celebrated and not very impactful.

    As one watches the political activities unfold across the country, there is a tendency to be despondent. This is reason the best brains in the country are being lured to other countries through the now socially coined word, ‘jakpa’. It is a euphemism for the lure that emigration from the country offers. Globally, immigration is not a crime as humans have been moving from creation for different reasons. However, the modern trend is a fall out of socio-economic conditions forced on the people by bad practice of winner takes all democracy.

    The constant political lexicon, ‘mergers and coalitions’ seem to only be for the positioning of the political actors most of who have played politics all their lives with little or no legacies of good service delivery. As the 2027 political season hots up, we are forced to ask the political actors, what new song shall the people sing? Are we just going to see, ‘my sin is smaller than yours’ kind of self-aggrandizement that has kept our political parties looking like tree brances to the monkey – a mere means of getting to either the next fruit or running from a predatory animal?

    As we watch the public race to grab the headlines and with it power, we watch keenly to see the stars that would shine on their merit like a Zik of Africa with his patriotism, an Awolowo with his free education legacy, an Aminu Kano with his pro-talakawa popularity and effective leadership, a Lateef Jakande with his investment in public housing and education. Each day, we watch and record…

    • The dialogue continues…

  • Insurance firms face hostile acquisition, mergers over low capitalisation

    More than two-thirds of insurance companies are valued below the minimum capital requirement to operate in the lowest rung of the proposed new insurance capital base, making most insurers susceptible to aggressive mergers and acquisitions.

    Current valuation of insurance companies obtained at the weekend by The Nation showed that some 70 per cent of insurance companies are valued below the N5 billion required to operate as a composite tier- 3 insurance company under the planned minimum capital requirements. Only 15 per cent of insurers meet the N15 billion requirement while 15 per cent meet the N5 billion for the second-tier composite operator.

    While regulators use the book value or shareholders’ fund as a measure of regulatory compliance, investment experts agreed that market value is a major component in any corporate valuation. Market value is usually ahead of book value because of the wealth creation potential and future value accretion of the book value. A reversal poses challenges in the event of capital raising and mergers and acquisition, according to investment pundits.

    Chief Operating Officer, GTI Capital, Mr Kehinde Hassan, said market valuation is one of the criteria for valuation of a company for any purpose of new share issuance or mergers and acquisitions.

    According to him, corporate finance experts use market value, net asset value or book value, peer group analysis and scenario analysis to reasonably ascertain possible valuation for a company. The financial ratios tend to revolve around a range and any value significantly outside the range is usually treated as an outlier and removed in the calculation of the pricing average.

    Hassan said low market valuation might have strong influence on the overall valuation of a company as strategic investors may only at best offer slight premium on market value of a company. In a hard-pressed situation, large investors may demand for market-based value or offer price around the pricing range.

    Managing Director, Sofunix Investment and Communications Limited, Mr. Sola Oni said low valuation is a possible trigger for aggressive mergers and acquisitions as low-capitalised companies may find it difficult to raise required capital in the event of massive capital raising exercise by many companies.

    According to him, market valuation, though not absolutely the exact determination of the value of a company in all cases, is a major indicator of the health of a company and over a period of time, the true reflection of its worth.

    “If a company is struggling to meet shareholders’ expectation, such a company is a target for acquisition. Strategic investors usually look for low valuations and synergies and for a company under pressure of minimum capital requirement, the market valuation may play a big role in the negotiation,” Oni said.

    He noted that one of the immediate expectations from the implementation of the new tier-based capital by the National Insurance Commission (NAICOM) is mergers and acquisitions, which may lead to historic consolidation of the insurance sector.

    Citing the example of the Nigerian banking industry, Oni said consolidation, though somewhat a bitter pill may be the much-needed tonic to boost investors and customers’ confidence in the sector, adding that capitalisation is a major requirement for global competitiveness.

    “Investors’ confidence in the insurance sector is low, so there is the need for a turnaround of the sector. Consolidation may lead to such turnaround. However, the current low valuations also present good opportunities for discerning investors who can see into the future, who know that Nigeria as a growing country cannot exist without a viable insurance sector, to take positions ahead of the repositioning of the sector,” Oni said.

    Most of the insurance companies are trading below their 50 kobo nominal value. Investment experts agreed that boards of insurance companies may find it difficult a decision to offer shares below nominal value.

    Under the new NAICOM’s tier-based minimum solvency capital policy, insurers will be classified into three tiers according to the minimum capital base and risk-bearing capacity. Tier 1 insurance companies are required to have minimum capital base of N9 billion for general insurance and N6 billion for life insurance, implying a composite capital base of N15 billion. Tier 2 companies are divided into two categories, with N4.5 billion minimum capital base for general insurance and N3 billion for life assurance. Thus a composite insurance-general and life insurance, will be required to have minimum capital base of N7.5 billion. Tier 3 companies will continue to operate on the existing minimum capital base of N3 billion for general insurance and N2 billion for life insurance, implying a composite capital base of N5 billion for a composite tier 3 insurance company.

    Under the risk-based capitalisation approach, tier 1 companies will be able to undertake all risks including annuity and high-level special risks such as energy and aviation risks. Tier 2 companies will undertake retail insurance as prescribed under Tier 1, including commercial and industrial risks and group life assurance while tier 3 companies will only be able to write retail insurance only including micro insurance, motor, fire, agriculture, compulsory liability insurances, individual life, health and miscellaneous insurance.

    The Nation recently reported exclusively that insurance companies have launched plans for emergency fund raising at the capital market as consolidation looms in Nigeria’s most populous quoted industry. There are 27 insurance companies quoted on the Nigerian Stock Exchange (NSE).

  • ‘Nigeria’s mergers, acquisitions market still vibrant’

    Nigeria, one of the largest and most active mergers and acquisitions (M&A) markets in Africa last year, still has the potential for growth as foreign and Nigerian investors and companies look to enter or scale up their operations in Africa’s largest market.

    The market delivered a year of steady deal flow last year with 25 deals worth $3.2 billion. Deal volume was however down by 22 per cent from 2014, which saw 32 deals worth $9.5 billion. Nigeria’s rich natural resources, large population and favourable demographics ensured that the country remained one of the busiest and most attractive M & A markets in Africa in 2015 despite currency volatility and a period of uncertainty leading up to the presidential election.

    Head, Advisory and Capital Markets, FBN Capital Limited, Afolabi Olorode, said Nigeria’s size, population and consumer trends make it more resilient and attractive to M & As.

    “The sheer size of Nigeria’s population and Gross Domestic Products (GDP) makes it an attractive market compared to most other countries in Sub-Saharan Africa (SSA). It is the biggest economy in Africa but most sectors are still underserved, which means there is massive growth potential. You would have to invest in a number of different countries to match the scale of opportunity in Nigeria, “ Olorode said.

    The scope of the opportunity in the country, and the limitations a weakening currency has placed on outbound deal making, contributed to an increase in domestic M & A activity in Nigeria, which over the past two years has accounted for nearly half of M & A volume. “Nigeria has been facing serious currency challenge, so we’re probably not as competitive when it comes to outbound deals. But we feel that there is still a lot of work to do here. The domestic market is underserved as it is, so there is no need to go out and start exploring the region or the continent,” Olorode said.

    There were 11 domestic deals in 2015 worth $1.5 billion with local oil and gas companies such as Seplat Petroleum and First Exploration & Petroleum Development Company dominating the deal flow with the acquisition of oil mining licences as oil majors, such as Shell and Chevron, are exiting their Nigerian assets.

    Nigeria’s rich natural resources mean the energy, mining and utilities sector still delivered more deals than any other sector, 28 per cent of total deal volume and 54 per cent of deal value, and distress among exploration and production and oilfield services companies amid the downturn in oil prices is sure to yield more opportunities in the sector in 2016.

    “We closed five deals in 2015 including acting as exclusive adviser to FBN Holdings Plc on the sale of its 100 per cent equity in FBN Microfinance Bank to Letshego Holdings Limited,” Olorode said.

    Olorode noted that another appealing aspect of the Nigerian deal market is that it has diversified beyond natural resources and has established a firm market for M & A in the TMT, financial services and consumer sectors, which all account for an increasing share of deal volume.

    Deals, such as US-based cereal maker Kellogg’s $450 million acquisition of food distributor Multi-pro Enterprise, and Unilever’s proposed $215 million investment for a 25 per cent stake in Unilever Nigeria, are examples of a deal market that offers opportunities across a variety of industries and demonstrate the strength of the consumer market.

    Besides, the growth in sectors outside of oil and gas has proven to be especially attractive for private equity players, who see Nigeria as offering targets of sufficient size to serve as platforms for regional and pan-African expansion. One example is UK-based private equity firm Actis’s $62 million purchase of a majority stake in Sigma Pensions.

    “Private equity investors who are looking for businesses of a certain scale make a first investment of around $15 million, and then follow up with a rollup strategy where, through the platform, they acquire other smaller players. This enables private equity investors to deploy a more sizable chunk of a fund,” Olorode said.

    However, Olorode pointed out that the Nigerian M & A market also poses risks with currency risk remaining a primary concern while uncertainty around regulation is a second concern, especially after MTN, the largest mobile operator in Africa, incurred a $5.2 billion fine from Nigerian authorities for failing to cut off unregistered users. The original fine of $5.2 billion, which was later reduced, was a double of MTN’s annual profits. Investors’ view on some of these key concerns will determine the M & A trend in 2016.

    “Compared to 2015, 2016 is likely to be equally challenging as some of the key issues that emerged in 2015 still need resolving. Last year investors were hesitant due to risks associated with the election and the volatility of the Naira. The policies adopted by the government in dealing with the exchange rate crisis as well as fiscal management in the face of reduced revenue will go a long in shaping investors’ positioning on Nigeria in the year and the medium term,” Olorode said.

    After several years of steadily increasing M & A activity, it seems African deal making has crossed the Rubicon. The continent has firmly entrenched itself into the global marketplace, with both domestic and inbound dealmakers seizing on the opportunities on offer. There were 290 deals in 2015, the highest volume since 2007. This figure coincides with the highest number of private equity deals on Mergermarket record (60).

    Respondents to the 4th edition of the Mergermarket survey anticipate M&A will continue to grow in 2016 – many cited cash reserves and easily available deal finance among the top drivers. Despite political turmoil in many countries, a prolonged downturn in the commodities cycle and related currency risk, Africa’s top economies have more than maintained investor interest with strong momentum in M & A across the majority of sectors. Distressed assets in the oil and gas sector could, in fact, generate more deals in the near term.

    In the renewables sectors, private equity firms are already reaping the rewards of their investments. One such example is Norfund’s exit from hydro company TronderPower in Uganda, as Africa seeks to accomplish 300GW of renewable energy generation by 2030.

    Across the continent – by no means a homogenous M & A market – investors have increasingly cast an eye over regional blocs that offer greater opportunity for cross-border activity.

    Deals in 2015 involving the manufacture of tissues, mattresses, baby foods and bottled water hint at diversification away from an economy centred solely on natural resources and the continuing promise for growth in the consumer sector.

    The key SSA destinations – South Africa, Kenya and Nigeria – have managed to turn challenges into opportunities by working to improve regulation and introduce greater transparency – both of which were among the principal obstacles to dealmaking, according to the survey.

    Alongside the continent’s established M & A markets, other emerging destinations, such as Ethiopia, Mauritius and Madagascar are also coming to the attention of dealmakers. Be it in established markets or up-and-coming nations, strategic buyers and private equity investors alike are looking beyond the commodities and extractive industries and increasingly appreciating the favourable valuations and expansion opportunities in Africa.

  • Concerns over insurer mergers, service disruption

    Mergers and acquisitions (M&A) among insurers may present as much of a risk as the risks the underwriters insure.

    According to Business Insurance report, property/casualty insurer mergers are an “emerging risk” for risk managers, said Debbie Rodgers, senior vice president of global risk management at Aramark Corp. in Philadelphia.

    Insurer solvency questions used to be a key concern for risk managers seeking coverage, but now the sheer volume of M&A activity means that the pool of companies from which to buy coverage is shrinking, she said.

    While the number of property/casualty insurer deals last year was smaller than in 2014, Ms. Rodgers said several studies have shown the 2015 deals were “significantly” larger.

    An example was Ace Limited’s acquisition of Chubb Corporation, forming the new Chubb Limited, in a deal worth $29.7 billion.

    Ms. Rodgers, Business Insurance’s 2010 Risk Manager of the Year, made the comments while moderating a panel on consolidation during Business Insurance’s seventh annual Risk Management summit in New York last week.

    Marti Dickman, vice president of risk management at Advanced Disposal Services Inc. in Pointe Vedra, Florida, said the continued consolidation has definitely changed the insurance marketplace — and not for the better, as far as risk managers are concerned.

  • How mergers and acquisitions are changing business landscape

    How mergers and acquisitions are changing business landscape

    The desire to gain controlling market share in an increasingly competitive environment is now compelling most multinationals to buy off smaller firms. In this report Ibrahim Apekhade Yusuf examines the pros and cons

    In the view of Dare Ogunyombo, a brand/PR specialist with Brooks and Blakes, for most big businesses, the received wisdom is that attaining success is just the beginning of a journey of discovery, little wonder that businesses who understand this hard truth have continue to reinvent themselves in order to remain relevant both in the present and far into the future.

    The foregoing anecdote becomes apposite in describing the craze by many a company, especially big businesses operating whether in the local or international sphere to grow their brands albeit through the mergers and acquisitions of smaller firms.

    Latest mergers & acquisitions

    Many big businesses in Nigeria in recent times, whether in the telecoms, beverage, pharmaceuticals, manufacturing, ICT, aviation to mention just a few have had to buy off other smaller firms in order to gain traction and control of the market share.

    A leading manufacturing company, Vitafoam Nigeria Plc has commenced a new initiative to reduce operating costs and boost shareholder value through its newly established subsidiary.

    Addressing the elated shareholders at the company’s Annual General Meeting (AGM) in Lagos, the Chairman, Dr Dele Makanjuola explained that the ongoing inclement operating environment had forced the company’s Board and Management to embark on cost saving initiative in order to sustain the company’s competitive edge.

    Makanjuola who reviewed the current challenges facing manufacturing firms in Nigeria noted that Vitafoam was able to remain profitable due to the prudent approach towards management of human and material resources, said the foam business is operating in a very competitive environment. There are over 300 manufacturers. It is stressful to operate in the foam industry.

    “We have almost concluded plan to commence production of oil filter in our new subsidiary. As for Vono Products, we shall keep the brand. We have gone to the Corporate Affairs Commission to ensure that the brand is not taken away,” Makanjuola said.

    The Coca-Cola Company and Tropical General Investments Group (TGI Group) – the holding company of Chi Ltd, Nigeria’s leading dairy and juice company only recently announced a binding agreement for The Coca-Cola Company to acquire an initial minority equity shareholding in Chi Ltd. The agreement creates a strategic relationship between two beverage industry leaders within Africa’s largest economy that together serve Nigeria’s most popular sparkling soft drinks, juices, value-added dairy and water beverage brands.

    Within the agreement, The Coca-Cola Company has made an initial 40 percent equity investment in Chi Ltd and intends to increase ownership to 100 percent within three years, subject to regulatory approvals, while working on other long-term commercial structures.

    “For more than 30 years Chi’s leadership has built a greatly admired business that has quickly grown to become Nigeria’s leading producer and distributor of value-added dairy and juice products and we are delighted to enter the next phase of our growth journey together,” said Nathan Kalumbu, President, Coca-Cola Eurasia and Africa.

    “Coca-Cola and Chishare the same commitment to Africa, to investing in our operations and to continuous innovation and our relationship will allow us to continue to provide Nigerian consumers the No. 1 beverage in each of the categories we serve.”

    “We strongly believe in this journey we are starting with The Coca Cola Company. The relationship will allow us to expand our regional footprint and product portfolio. We stay firmly committed to growing our investments in the Nigerian economy, increasing employment and local content while supporting the communities we operate in. Chi will continue to provide its consumers with innovative products in the dairy, juices and snacks categories,” said Cornelis Vink, Chairman of TGI Group and Chi Ltd.

    “Coca-Cola has been investing in Nigeria for more than 60 years and today’s announcement represents the latest significant step in our commitment to growing our business and providing trusted beverage brands for Nigerian consumers and communities,” said Kelvin Balogun, President of Coca-Cola Central, East and West Africa.

    MTN Nigeria recently completed the acquisition of Visafone, the only surviving Code Division Multiple Access network in Nigeria’s telecommunications industry.

    Justifying the need for the acquisition, MTN Executive, Amina Oyagbola said the acquisition of Visafone was in line with a continued commitment by MTN to improve the quality of broadband services for its subscribers.

    She said the acquisition, which sought to leverage resources for service enhancement, was also reflective of the company’s concerted efforts to deepen the growth and roll out of broadband services across the country.

    According to her, the acquisition of the CDMA network is in support of the National Broadband Plan for the benefit of Nigerians.

    “As we work to maximise our data capabilities towards achieving broadband of international quality, our objective is to ensure that Nigerians experience a boost in the quality of broadband internet services,” she said.

    The acquisition of Visafone, she stressed, “highlights MTN’s commitment to Nigeria. More capacity will facilitate enhanced product/service offerings and experience in the data space to the delight of our valued customers.

    “Voice is still King. However, data is becoming increasingly important in our everyday lives and our energies are focused on enhancing data and internet services to the benefit of our customers and the country at large.”

    Visafone is one of the leading CDMA/ICT companies in Nigeria offering a number of services, which include voice, high speed data (3G), internet and other Value Added Services.

    Echoing similar sentiments, founder and retired Chairman of Visafone Communications Limited, Jim Ovia said the business deal would ensure the continuity of the Visafone trademark broadband, enterprise solutions and voice services to its customer base.

    According to Ovia, “The advent of mobile telecommunication services into the country over a decade ago has impacted Nigeria positively and created a new industry powered by technology and innovation. Looking back, we have recorded progress and achievements that have positively impacted the growth of other sectors such as banking, e-commerce and entertainment. We recognise that the industry holds greater potential that can further catalyse Nigeria’s economic growth generally.”

    Last year, Olam Nigeria said its Singapore-based holding company, Olam International Limited has acquired Amber Foods Limited for $275 million, which is about N8.4150billion.

    The deal was consummated through Olam’s subsidiary Quintessential Foods Nigeria Limited who are owners of the wheat and pasta manufacturing assets of BUA Group in Nigeria.

    The BUA Group, is a diversified foods and infrastructure business group in Nigeria, it’s among the top five wheat millers in the country with wheat milling and pasta manufacturing capacities of 3,760 and 700 metric tonnes per day (TPD) respectively.

    The assets acquired include two wheat mills and a pasta manufacturing facility in Lagos, a mill in Kano, and a wheat mill and a pasta manufacturing plant under construction in Port Harcourt. The wheat milling sector in sub-Saharan Africa has been an area of investment focus for Olam since 2010 when it acquired Crown Flour Mills, CFM in Nigeria.

    Since then, Olam has expanded Crown Flour Mills capacity and set up milling operations in Ghana, Senegal and Cameroon.

    Accordingly, this acquisition will strengthen Crown Flour Mill’s position as the number two wheat miller by sales volume and make it a leading pasta player in Nigeria.

    In the brewery segment of the market, Guinness Nigeria boosted its product portfolio with the recent acquisition of the distribution rights to United Spirits Limited’s brand in Nigeria.

    The deal means Guinness Nigeria have the rights to distribute McDowell’s’, a mainstream spirits brand of United Spirits Limited (USL) in Nigeria.

    United Spirits Limited (USL) is a subsidiary of Diageo plc which is a global leader in beverage alcohol with an outstanding collection of about 22 brands across spirits, beer and wine categories.

    In 2013-14, Diageo plc acquired a 54.8% shareholding in United Spirits making India one of its largest markets. This transaction became effective on 1st February 2016.

    With the introduction of MCdowell’s, Guinness Nigeria’s product portfolio has now been boosted the number of its alcoholic brands.

    In a move that will further seal its place as a payments juggernaut in the African continent, Interswitch just acquired Vanso for a total value of $50million about ¦ 15 billion.

    A reliable source has confirmed the deal adding that Vanso initial asking price was in the region of $80 million. The deal will see Interswitch acquire all Vanso’s assets including management staff.

    Vanso provides mobile and internet solutions for Nigerian banks. It has been doing so for almost 13 years. Virtually every Nigerian mobile banking app is based off Vanso’s solution. With this acquisition, Interswitch will be able to leverage Vanso’s robust technology and relationship with local banks to further expands its reach within the local FinTech sector.

    Commenting on the business deal, Stanley Mabiakwu, an ICT expert said, everything Interswitch has done over the past year — including the establishment of the N10 million ePayment Growth fund, which saw ACE and SlimTrader as beneficiaries — has a lot to do with the potential billion-dollar IPO.

    “If everything works as planned, we could well be seeing the first billion dollar Nigerian tech company before 2016 runs out.”

    Nigeria not alone

    The craze for mergers and acquisition by corporate firms is gaining ground worldwide.

    In April 2012, Facebook CEO Mark Zuckerberg did the unthinkable. With the company about to begin its IPO roadshow, Zuckerberg made a surprise acquisition of a two-year-old photo-sharing app called Instagram.

    What’s more, Zuckerberg paid out the nose for it, shelling out $1 billion for an app that had 13 employees, zero revenue, and which most of the buttoned-up investors that would attend Facebook’s IPO roadshow had probably never heard of.

    The deal caused immediate concern. Some considered the deal a sign of Zuckerberg’s impulsive nature and questioned whether the hoodie-wearing, then 27-year-old founder was ready to lead a publicly held corporation.

    It might have been one of the smartest things Zuckerberg ever did.

    Facebook wouldn’t disclose exactly how much revenue Instagram generated, and Instagram’s contribution to Facebook’s top line is still just getting started.

    But it’s starting to have an impact. Facebook COO Sheryl Sandberg noted on the earnings conference call that 98 of the top 100 Facebook advertisers now also advertise on Instagram.

    Barclay’s Paul Vogel pegged Instagram’s Q4 revenue at $276 million, and now projects that Instagram will “eclipse” $1.3 billion in 2016.

    In other words, the big revenue upside that Facebook just wowed Wall Street with is only going to get better next year.

    Instagram, which now has 400 million users, is helping Facebook stay relevant and “cool” with the younger generation.

    In an unprecedented merger that will create the world’s largest pharmaceutical company, Pfizer Inc. and Allergan announced last Monday that they’re merging in a deal worth up to $160 billion.

    The new company, Pfizer Plc, will be the world’s largest drugmaker, make drug products ranging from Viagra to the Prevnar pneumonia vaccine to Botox — but it will be doing so with its official headquarters in Dublin, Ireland, where Allergan is based and the official tax rate is lower than in the U.S.

    The drug company tie-up is the biggest deal in what’s been a big year for mergers and acquisitions.

    Besides health care and pharmaceuticals, the wave of deal-making has also swept through airlines, transportation, real estate, oil and gas, mining among others.

  • Mergers, acquisitions likely for banks

    Mergers, acquisitions likely for banks

    Six commercial banks are likely to seek mergers and acquisitions in the New Year – no thanks to the shock created in their assets and balance sheet sizes in the face of declining oil prices.

    Crude oil prices have fallen to as low as $37.11 per barrel from over $110 per barrel a year ago. This has adversely affected banks’ oil assets.

    Besides, the level of non-performing loans in the sector has risen.

    The Managing Director, Sterling Bank Plc, Yemi Adeola, who disclosed this yesterday said he envisaged possible shrinking in the number of local banks in the New Year. There are already moves suggesting that trend, he said, but did not name any bank.

    Speaking at an end-of-year media briefing in Lagos, the bank chief said two international banks were discussing with local lenders on possible acquisition. He said the year has been a challenging one for the economy and the banking sector, adding that banks are now finding ways to wriggle out of these challenges, including a tough regulatory environment.

    He said oil price could also come further down, and called for a more efficient tax system, blocking of revenue leakages and focus on areas neglected in the past – “from agric to solid minerals and other commodities we have in abundance. We also need to support Small and Medium Enterprises to create opportunities that will create jobs,” he said.

    Adeola said the Nigerian banking industry was the most regulated sector in the country thereby affecting banks’ performance.

     “To say that everything will be rosy in 2016 will be deceiving ourselves. I think if the opportunities arise for banks to pursue further consolidation, we could see two or three. I also know that one or two international banks are interested in pursuing acquisitions in Nigeria and they are indeed having discussions already,” he said.

    “So, you could see a combination of one or two international banks taking over one or two Nigerian banks or merging with them. And nothing also stops two or three Nigerian banks having merger discussions in 2016.”

    Adeola said Sterling Bank is ready for either a merger or an acquisition, provided it will add value to stakeholders. “For us at Sterling Bank, we are always open to mergers or acquisitions. We are open to anything that can give us scale. Whether it is a merger or acquisition, we are open, but the synergy must be there. We must see the benefits clearly. Any merger must be one that ensures stakeholders will benefit more; otherwise it will not be worthwhile,” he said.

    Adeola added: “We have every cause to remain optimistic in 2016, despite the fact that it is going to be a challenging year for the banking sector. We are determined to keep the momentum going. We first started a merger of five banks, and all the consultants predicted that all the entities will struggle for the next 10 years. It was challenging but we got out of it.  Experience has shown globally, that mergers don’t work, especially when you are merging five institutions.”

    Adeola said Sterling Bank did first merger in 2006 and ran as a bank from day one, despite the fact that five banks came together. “In 2011, we did another merger with Equitorial Trust Bank (ETB), and was done in record time and you will never see cultural differences. We are one bank, and it means we have perfected the act of acquisitions. Could there be an opportunity to pursue an acquisition again, we will try,” he said.

    Adeola said the foreign exchange challenge remained a tough one for banks and the economy. “You can only spend what you have and if our reserves are at $29.4 billion as at December 15, there will barely fund four to five months of import. The options are usually two: to adopt capital control and focus on key sectors. In other words, you determine where you want the forex to go to in order to curb wastages,” he said.

    In Adeola’s view, Nigeria cannot sustain capital controls for so long. He said the government does not want the forex to be used for speculative purposes. “But it is a double edged sword. If you adopt capital controls, investors are reluctant to come in, because if they bring their money in at N200 to dollar, they will not be able to know what rate when they are going. So, you shut your door to new money coming in. The other option, is let the naira find its true value. The question is what is the true value for the naira?”

    To Adeola, the right thing to do is find the true value of the naira and devalue it from there. “Some will suggest the street value, while others will suggest the Central Bank of Nigeria rate. But it is also not the true value. The true value of the naira is between the CBN rate and the parallel market rate. But there are ways we can find the true value of the naira and devalue to that extent. If people are sure, they are getting true value for their dollars, then the dollars will come down,” he said.

    Adeola said Sterling Bank continued to survive in spite of such tough regulations because it plays by the rules. “We do not flout regulations. We keep strictly to regulations. We will continue to face challenges that come our way with maturity. He said the bank desires to be a top six bank, from top 10 currently, and also be a leading consumer banking franchise,” he said.

  • 80 capital market firms may opt for mergers, acquisitions, restructuring

    80 capital market firms may opt for mergers, acquisitions, restructuring

    Not fewer than 80 capital market firms may opt for business combination and restructuring, according to a source in the know of compliance with the new minimum capital requirements at the capital market.

    According to the source, the compliance reports filed with the Securities and Exchange Commission (SEC) have so far indicated that while most capital market operators may scale through by the September 30, this year deadline, some 80 capital market firms may have to undertake mergers and acquisitions or downsizing of their operations to stave off the threat of liquidation.

    The source said more than 300 operators have complied with the new minimum capital requirements for their functions, leaving about 170 operators.

    Almost half of these operators have already been determined to be inactive and will likely be the first set of operators to be weeded out under the first compliance check.

    The Nation on Monday reported that SEC has given capital market operators seeking to undertake mergers and acquisitions or any reclassification of their functions a deadline of July 31 to formalise such arrangement and file the necessary information with the apex capital market regulator.

    In a July 4 circular to capital market firms, the apex capital market regulator directed  operators, which might have opted for mergers, acquisitions or any other form of business combination as a vehicle to meet the new minimum capital requirements to file their notifications with the Commission not later than July 31, this year.

    The directive also applies to capital market operators proposing reclassification or reduction of their registered functions, including those seeking to downsize from stockbroker to sub-broker, broker-dealer to either broker or dealer and from multiple functions to a single function among others.

    The Nation recently reported that some capital market operators were considering mergers and acquisitions as viable alternative plan to stave off the threat of liquidation.

    Market sources had said there had been intense discussions around consolidation, a reference to mergers and acquisitions, in recent months as the new management of the apex capital market regulator insisted it would not rescind earlier decisions on the new minimum capital base.

  • Nigeria records 24 mergers, acquisitions

    Nigeria records 24 mergers, acquisitions

    Nigeria recorded 24 mergers and acquisitions in 2014, driven largely by the continuing divestments by banks from non-core financial services.

    Total value of the mergers and acquisitions was put at some N500 billion, according to one analyst’s estimate.

    Official data on mergers and acquisitions by the Securities and Exchange Commission (SEC) obtained by The Nation indicated that three mergers and 21 acquisitions were consummated last year.

    Mergers and acquisitions within the period were highlighted by major transactions such as the business combination between Nigerian Breweries and Consolidated Breweries, the acquisition of Mainstreet Bank Limited by Skye Bank Plc and acquisition of ConocoPhillips Nigeria’s business by Oando Energy Resources, a subsidiary of Oando Plc.

    The biggest transaction was the acquisition of Nigerian businesses of ConocoPhillips (COP) by Oando in a transaction valued at $1.55 billion. In December 2012, Oando, through its subsidiary Oando Energy Resources (OER), had entered into an agreement with COP to acquire COP’s Nigerian businesses for a total cash consideration of US$1.55 billion. The payment and government sign-off of the deal was concluded in 2014.

    This was followed by acquisition of the entire issued shares of Mainstreet Bank Limited from Asset Management Corporation of Nigeria (AMCON) by Skye Bank Plc for total consideration of N120 billion.

    The report underlined the ongoing divestments by banks as major drivers for mergers and acquisitions with nearly half of the transactions directly and indirectly related to the change in banking regulatory framework.

    The Scope of Banking Activities and Ancillary Matters No 3, 2010 requires banks to fully concentrate on core banking functions. The new model requires banks to either sell all non-core banking businesses or form a holding company to hold such non-core banking businesses including activities such as insurance, asset management and capital market operations. Most banks opted to divest from non-core financial services.

    Veritas Registrars Limited acquired 658.3 million ordinary shares, about 45.4 per cent equity stake, in Zenith General Insurance Limited from Zenith Bank Plc. Stacap Limited acquired 100 per cent equity stake in Union Capital Markets Limited, a subsidiary of Union Bank of Nigeria Plc. Also, Greenoaks Global Holdings acquired 6.97 billion ordinary shares or 92.75 per cent equity stake in Union Assurance Company Plc from Union Bank of Nigeria Plc and its subsidiaries, including Union Homes, UBN Properties, Union Trustees and William Street Trustees.

    Quad Capital Limited acquired FinBank Securities and Asset Management Limited, Oriental Capital Asset Management Limited acquired 100 per cent equity stake in FINBANK Insurance Brokers Limited, Capital Alliance Private Equity III Limited acquired 3.17 billion ordinary shares or 96.11 per cent equity stake in FIN Insurance while Capital Limited acquired 2.50 billion ordinary shares in FinBank Capital Limited.

    Other transactions related to the banks’ divestments included Kaizen Partners Nigeria’s acquisition of the entire issued shares of Diamond Capital and Financial Markets Limited and Diamond Securities Limited, acquisition of 50 million or 100 per cent equity stake of Citadel Registrars by Union Registrars Limited and acquisition of 54 per cent equity interest in Kakawa Discount by FBN Capital Limited and simultaneous redistribution of 20 per cent interest to FBN Holdings Limited.

    Other acquisitions during the year included acquisition of 334.62 million ordinary shares or 94.7 per cent equity stake in Independent Securities Limited by Butterpot Capital Limited, the acquisition of 25 million ordinary shares of N10 and 29 million preference shares of N10 in SIM Capital Alliance Limited by ACA Holdings Limited from Sanlam Investments Holdings Limited, acquisition of 100 per cent equity stake by HBCL Investment Services Limited in Enterprise Bank Limited from Restructuring Company Limited and Eligible Securities Limited, and acquisition of 60 per cent equity stake in Penman Pension Limited by Mansard Insurance Plc.

  • Market operators mull mergers, acquisitions

    Market operators mull mergers, acquisitions

    •SEC appraises new capital base

    Capital market operators are considering mergers and acquisitions as viable options to stave off the threat of liquidation under newrules set by the  Securities and Exchange Commission (SEC) .

    Reliable market sources said there have been intense discussions around consolidation, a reference to mergers and acquisitions, in recent months as the new management of the apex capital market regulator insisted it would not rescind earlier decisions on the new minimum capital base.

    Sources said while some stockbrokers and other operators were considering raising funds through special placements, most deficient operators have started preliminary discussions on mergers and acquisitions.

    Capital market operators, especially stockbrokers, had mounted strong lobby for a downward review and change in the structure of the new minimum capital requirements. The hopes of a revision had risen with the exit of the former director general, Ms Arunma Oteh and the appointment of Mr. Mounir Gwarzo, a stockbroker, as the substantive director general.

    But the new SEC management has insisted on the implementation of the new minimum capital requirements as previously scheduled. Gwarzo had hinted in February that SEC would appraise compliance with the new minimum capital base requirements in June.

    Gwarzo had told a team of the council and management of the Nigerian Stock Exchange (NSE) that visited him that the Commission was delighted that it has had a good collaboration with all stakeholders on the issue of the recapitalization and it “will return to the exercise in the next five months”.

    A source said a string of major enforcement actions taken by the Commission recently had impressed it on the capital market operators that the apex capital market regulator may not tolerate default. SEC had last week suspended operations of BGL Group, one of the largest investment banking firms at the capital market, from all capital market activities. The Commission also suspended all sponsored officials of  the BGL Group, including its managing director who was the president of the Chartered Institute of Stockbrokers (CIS).

    It should be noted that SEC had extended the deadline for compliance with the new minimum capital requirements for various capital market functions from December 31, 2014 to September 30, 2015. Before the extension, some 262 capital market operators had met their various capital requirements.

    However, the larger segment of the capital market operators had called for a review of the minimum capital base arguing that it violated the principles of risk-based approach that should govern the capitalization of multi-operators market.

    SEC had 2013 announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that was initially scheduled to take off by January 1, 2015. Minimum capital base for broker and dealer was increased by 329 per cent from the existing N70 million to N300 million.

    Broker, which currently operates with capital base of N40 million, will now be required to have N200 million, representing an increase of 400 per cent.

  • ‘Why mergers, acquisitions in aviation sector are difficult’

    ‘Why mergers, acquisitions in aviation sector are difficult’

    Lack of fleet commonality, distrust among airline managers, pride of ownership and various ratings for pilots and engineers have been identified as factors inhibiting domestic carriers from doing merger, acquisition and consolidation to remain formidable.

    The Managing Director, Medview Airlines, Alhaji Muneer Bankole, said at the weekend, that consolidation or merger of airlines would have been the best for airline operators if they could work out a template for such cooperation.

    He said if domestic carriers were using the same aircraft model, for instance, a Boeing airplane, such fleet commonality would make it easy to achieve economies of scale in sourcing for aircraft spares, pilots, engineers, flight dispatchers as well as designing a common training programme.

    He said merger would have been made easier if for instance, the merging carriers were flying Boeing, Airbus, Fokker, MD 83, Dornier, Bombardier and ATR 72 aircraft types.

    Bankole said designing flight, maintenance and operational manuals for different aircraft types according to their manufacturers’ specification may not be easy n if some carriers decided to come together.

    He said: “‘It would have been a good thing for domestic carriers in Nigeria to come together in the form of merger or consolidation. But it will be very difficult in Nigeria. This is because there is the challenge of ego among airline owners who ate afraid of losing their carriers.

    “There is also the challenge of lack of trust. But, the major obstacle is lack of fleet commonality, while some carriers are using the Boeing aircraft others use Airbus, Bombardier, Fokker, MD 83, Dornier Jets how will these airlines come together.

    “There would be challenges of sourcing different pilots and aircraft engineers type rated on the different airplanes.

    “This would cost more money. Also in terms of aircraft maintenance, how do you source spate prays for different aircraft types, what about training for technical personnel. These are the hurdles to cross before we could achieve merger or consolidation.”

    Bankole urged the government to  partner Maintenance, Repairs and Overhaul (MRO) firms abroad to invest in Nigeria, to save the industry from collapse.

    He said investing in MRO facilities would help breathe life into the aviation industry and save the country of huge capital flight.

    Bankole said: “The government should invite MRO companies to invest and partner with them in the country and by so doing, we will be doing our C-checks here. It will reduce the cost of maintaining aircraft outside.”

    According to him, airlines’ owners were finding it difficult in taking their planes outside for C-checks, describing it as capital intensive, adding that the establishment of such facilities would reduce the burden of airlines in the country.