The plan by the Assets Management Corporation of Nigeria, AMCON, which bought over bad loans by banks such as former Afribank Plc, (popularly known as Mainstreet Bank Limited, one of the bridged banks under its ownership), to divest its investment from the bank later this September, has set it on a collision course with shareholders and investors like Intangis Holdings, an American investment company believed to own majority shares in the bank. Intangis has since instituted litigation against AMCON in its quest to protect shareholders’ investments valued at over $1.4billion. Ibrahim Apekhade Yusuf in this report examines the issues
If the crisis brewing over the proposed sale of Mainstreet Bank Limited, one of the nationalised banks set up by the Assets Management Corporation of Nigeria (AMCON) later this September is anything to go by, then it is correct to say that the planned sale may not become a done deal after all.
Prelude to proposed sale drama
It is instructive to note that AMCON had assured fairness in the planned sale of Mainstreet Bank even as it defended timelines for prospective bidders.
Expectedly, the Corporation had selected reputable world-class firms, Barclays/Afrinvest Consortium and Banwo & Ighodalo, as financial and legal advisers, including the Central Bank of Nigeria, in the planned sale.
AMCON’s Chief Communications Officer, Kayode Lambo, in a press statement recently in reaction to the reported investors’ concerns on the Corporation’s timelines for sale of Mainstreet Bank may not work, had countered such fears.
According to Lambo, with regards to the on-going divestment exercise of Mainstreet Bank, interested bidders were only invited to submit their expression of interest within nine days of the publication of the invitation in the acquisition of AMCON’s shareholding in Mainstreet Bank Limited.
The number of days required to submit an expression of interest, he said, is more than adequate for any serious buyer to respond with the required basic information of the entity interested to be admitted into the process, as well as their reasons and basis for the interest.
AMCON further said that bidders at this stage are neither required to conduct any due diligence on Mainstreet Bank nor are they required to provide any indication of valuation or pricing.
The information requested from bidders are simple and basic details about their company’s history, experience, ownership and other general information that will enable the advisers send further information to eligible investors.
The sale of a bank, he said, is a standardised practice all over the world and at a latter stage, qualified bidders will have the opportunity to submit offers under a Request For Proposal (REP), and thereafter conduct due diligence exercise on the bank, which is expected to take a longer time.”
Discordant tunes over planned sale
AMCON’s assurances notwithstanding, shareholders raised objection over the planned sale of Mainstreet last May, saying they were not sold on the idea as well.
Some major shareholders had kicked against what they called AMCONs hasty decision to sell Mainstreet Bank Limited.
The group specifically kicked against the one-week notice given by AMCON to those who are interested in bidding for the bank to express their interest, a development seen to be grossly inadequate for any meaningful due diligence to be done on the bank.
In advertorials in the media last early May, AMCON reportedly gave a week’s notice to interested parties in the acquisition of the bank to submit their Expression Of Interest (EOI) not later than May 16.
To the parties, who asked not to be named so as not to jeopardise their interest, they said the “rush” by AMCON to push Mainstreet Bank through the divestment process without recognising the enormous work that needs to be done to ensure fairness and transparency in the eventual bid process, puts a question mark on AMCON’s intention.
The group insisted that Mainstreet Bank Limited, Enterprise Bank Limited and Keystone Bank Limited are national assets, to which every Nigerian has a claim, insisting that all the processes leading to their sale, or privatisation at any material time must be done in such a manner that no one is seen to be excluded, either by way of withholding information, or restricting access to the process by not allowing sufficient time for qualified people to participate therein.
Things fall apart
Indication that things may have fallen apart irreversibly became apparent last Monday when Intangis Holdings, an American financial and investment company, raised dust over the planned sale of the Mainstreet Bank by AMCON, citing concerns over flouting of corporate governance procedures.
Crux of the matter
In a statement issued by Intangis, the firm noted that its decision to contest the planned sale of Mainstreet Bank Limited was to guide against possible cover ups by AMCON.
In the statement which reads in part, the American firm recalled that: “This liquidation concluded between 5th and 8th August 2011 with total disregard to the rules of law, harmed all Afribank’s shareholders and creditors, including Intangis Holdings.”
The firm explained that it referred the matter to the International Court of Arbitration, on the 29th of April, 2011, “which issued a preliminary decision in its favour in September, 2013 and took the view that Mainstreet Bank was party to the contract between Intangis Holdings and Afribank.”
However, the firm said since that decision, AMCON has taken steps to divest from Mainstreet Bank, “while omitting to make provision as required by the international accounting rules (IFRS) for certain liabilities of the bank, estimated by Intangis Holdings at $1.4 billion.”
Intangis Holdings, which did not indicate whether the $1.4billion is equivalent of its investment in Afribank, is insisting that AMCON complies with the international accounting rules enshrined in the International Financial Reporting Standards (IFRS), pointing out that it reserves the right to commence legal proceedings to assert its rights.
It said: “AMCON has broadened its mandate to the detriment of transparency and governance requirements that are essential in a global business world. Having referred the Mainstreet Bank (formerly Afribank) case to the International Court of Arbitration (ICC) in Paris, Intangis Holdings is contemplating legal action against AMCON.”
The firm noted that AMCON has set a September 15th date for the sale of Mainstreet Bank, warning that, “if AMCON manages to sell Mainstreet Bank after having organised such a transaction and without ensuring proper reporting of the bank’s books, we would be dealing with a huge scandal. The banking group would be jeopardised, its customers endangered and its historic shareholders and creditors would suffer irreversible damages.”
Reacting to Intangis Holdings claims, AMCON denied any wrong doing, saying its investment in Mainstreet Bank, has no linkage with Afribank.
In a memo from Project DOS Advisers draft response to Intangis, AMCON explained that Intangis Holdings Limited recently wrote to AMCON’s advisers on the ongoing divestment by AMCON of its equity in Mainstreet Bank Limited, stating that AMCON is procuring a breach of Intangis’ rights under a Confidentiality and Non Circumvention Agreement (CNCA) dated 2 November, 2009 between Afribank and Intangis.
In its defence, AMCON said it is not a party to any agreement with Intangis and that Mainstreet did not even exist at the time Intangis signed the CNCA with Afribank. It added that Mainstreet Bank was established following a special’ audit of the banking sector in which Afribank was found to be “in a grave situation” along with nine other banks.
It said Afribank’s Board and Management was then replaced by the Central Bank of Nigeria (CBN) with a view to cleaning up the bank and repositioning it.
“However when it became apparent that Afribank lacked the capacity and ability to recapitalise before the September 2011 deadline, CBN revoked Afribank’s license. Consequently, pursuant to Section 39 of the NDIC Act, the Nigerian Deposit Insurance Corporation (NDIC) in consultation with CBN organised and incorporated three “bridge banks” including Mainstreet. A Purchase and Assumption Agreement was executed by NDIC (as the statutory transferor of Afribank) and Mainstreet, who purchased assets and assumed certain liabilities of Afribank. AMCON subsequently subscribed for shares of Mainstreet in 2011.
Speaking exclusively with The Nation from his base in US, in an online interview over the weekend, Jean Missinhoun, Senior Partner, Intangis Holdings said it was determined to pursue the matter to a logical conclusion at the law court.
A disincentive to investment
Speaking with a cross-section of respondents who ventilated their views on the impasse involving AMCON and shareholders of Mainstreet Bank, they said matter-of-factly that if the details of the transaction are considered on its merit, AMCON may have taken the other parties for a ride.
Firing the first salvo, Mr. Ibrahim Abdulmalik, a lawyer said, clearly there is a breach in the agreement, and AMCON could be liable if the case is proven beyond reasonable doubt.
“Such disappointments may clearly be a disincentive to business. The crisis within Mainstreet Bank is a sad commentary on what is currently playing in the so-called nationalised bank set up by AMCON. I think the authorities need to review these cases with a view to dispensing justice”, he stressed.
Echoing similar sentiments, a member of the shareholders’ association who asked not to be named because he is not authorized to speak on behalf of the group said many of the shareholders of the bridged banks are not happy with the way things have turned out.
Short of blaming the Sanusi-led CBN governor for some of the trouble plaguing the nation’s financial sub-sector, the shareholder called for a re-orientation.
