Nedbank to Take 20% Stake Worth $500m in Ecobank

Nedbank Group Limited the South Africa lender controlled by Old Mutual Plc plans to exercise an option it has from next month to buy one-fifth of Ecobank Transnational Incorporated (ETI) in a deal valued at more than $500 million.
We had reported about a fortnight ago that the move by the South African bank to increase its stake in ETI was causing anxiety in the market.
But Bloomberg quoted Nedbank’s Chief Executive Officer, Mr. Mike Brown, yesterday to have said his financial institution intends to take up its right to convert a $285 million loan made to Ecobank in 2011 into an estimated 11 per cent stake. A second subscription right allows Nedbank to increase its holding in Togo-based Ecobank to as much as 20 per cent, he said, without giving a time frame for the plan.

“It is our current intention to exercise our rights,” Brown wrote in an e-mailed response to Bloomberg, saying the bank hasn’t taken a formal decision to proceed.
He added: “We have always anticipated that the total cost to get to a 20 per cent shareholding will be greater than the original loan.”

The Public Investment Corporation (PIC), which manages more than 1 trillion rand ($99 billion) mostly on behalf of South African government workers and has considerable interest in Nedbank, also bought about 20 per cent of Ecobank in April last year, making it the lender’s biggest shareholder.

We had gathered that in order to finance its acquisition of former Oceanic Bank Plc, Ecobank Nigeria, through its parent company, ETI, had secured convertible loans from Nedbank of South Africa. ETI also took another convertible loan from PIC.

Ecobank, which trades on three African exchanges and operates in 33 nations on the continent, reported last month that profit increased 65 per cent to $250 million in the nine months through September as its business in Nigeria and Ghana expanded.
While Ecobank has the reciprocal right to buy a stake in Nedbank, its Chief Executive Officer, Thierry Tanoh, had said in May that the lender may delay taking this option to focus on its African businesses.

Nedbank has a 12-month window, starting in December, to convert the loan into Ecobank shares. Nedbank formed an alliance in 2008 with Ecobank. The Togolese lender, founded in 1985, also operates in France and has representative offices in Beijing, Dubai and London.

Ecobank Chairman, Mr. Kolapo Lawson, who retired last month, plans to step down on December 31 amid allegations of fraud that are being investigated by the Securities and Exchange Commission.

November 21, 2013