Nedbank, a South African lender plans to exercise its right to acquire a 20% stake in Ecobank in a deal valued at more than $500 million.
The deal arises from a convertible loan it made to Ecobank in 2011 for $285 million. The nature of the loan structure allows Nedbank the option to take up as much as 20% of the shares in Ecobank.
Mike Brown, CEO of Nedbank said the company intended to exercise its rights to take up the shareholding.
“It is our current intention to exercise our rights,” Brown wrote in an e-mailed response to questions, saying that the bank hasn’t taken a formal decision to proceed. “We have always anticipated that the total cost to get to a 20 percent shareholding will be greater than the original loan.”
Ecobank, which trades on three African exchanges and operates in 33 nations on the continent, reported last month that profit increased 65 percent 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, CEO Thierry Tanoh 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.
The Public Investment Corp., which manages more than 1 trillion rand ($99 billion) mostly on behalf of South African government workers, bought almost 20 percent of Ecobank in April last year, making it the lender’s biggest shareholder. Ecobank Chairman Kolapo Lawson plans to step down on Dec. 31 amid allegations of fraud that are being investigated by Nigeria’s capital markets regulator.
[Bloomberg]