Thursday, 8 October 2015

ETI CHANGES MIND OVER DIVESTING FROM ECOBANK NIGERIA PLC

Ecobank Transnational Incorporated (ETI) has stopped its plan to divest some its stake in its Nigeria subsidiary, Ecobank Nigeria Plc, due to falling equities’ prices. This development was made known by the Chief Executive Officer of the bank, Mr. Ade Ayeyemi, who spoke with Tectono Business Review.

Yes, we gathered that ETI had stated that it would sell part of its stake in Ecobank Nigeria Plc by the end of the year to boost its working capital and meet up with the Central Bank of Nigeria (CBN)’s directive on minimum capital threshold.

 ETI had planned to raise as much as $400 million with a sale of about 25 per cent of the Nigerian subsidiary but the bank’s shares have fallen by 12 per cent since the end of June, amid concern among investors that a slowdown in China, sub-Saharan Africa’s biggest trading partner, and a looming rise in U.S. interest rates may weigh on economic growth.

The Ecobank Nigeria Plc boss stated that sliding market values implied that the bank would not get good deal from the sale.

In his own words: “The market is not right for us to be selling part of that unit. We will not be doing any dilution at the moment. You cannot sell an asset you don’t have to sell at the time when market prices are at the bottom of the trough. We are adequately capitalized at the moment and if there are business opportunities that require us to have more capital, we will support that. We always have the option in future.”

According to the bank’s biggest shareholder, Nedbank Group Ltd., it was against being diluted by a sell down of the Nigerian business, which is Ecobank’s largest. The South African bank spent almost $500 million buying a 20 per cent stake less than a year ago.

In an chat with newsmen, Mfundo Nkuhlu, who is the Chief Operating Officer at Johannesburg-based Nedbank Group, said: “By raising tier 1 capital at subsidiary level, you’re  possibly  diluting those who own Ecobank from the holding company level. Any capital raise needs to be economically sensible to the holding company shareholders.”