Investors in Nigeria’s second-oldest bank, Union Bank of Nigeria Plc, have expressed dismay over the planned delisting of the 106-year-old financial services institution from the Nigerian Exchange, emphasising that the action smacks of poor corporate governance.
The Tier-2 bank had announced on Tuesday, May 16, that it would exit the Nigerian Exchange in June 2023, and become a private concern, citing an order of the Federal High Court, Lagos to that effect.
This was a year after the bank was acquired by new investors, Titan Bank Limited in June 2022.
The exit programme involves a buyout arrangement that would make the core investors the sole owners of the bank, while the minority shareholders go home with cash and bid goodbye to their bank.
Titan Trust Bank Limited, the core investor that rescued Union Bank in June 2022, has offered to pay minority shareholders the sum of N7 per share in a buyout scheme for delisting from the Nigerian Exchange by the end of June.
To this end, Union Bank shareholders are expected to meet in Lagos on June 13, 2023, after an order of the Federal High Court Lagos directed that a meeting of shareholders be convened “to consider and if thought fit, approving (with or without modification) a Scheme of Arrangement between Union Bank of Nigeria Plc and the holders of its fully paid ordinary shares.”
In a filing to the Nigerian Exchange (NGX) on May 16, 2023, quoting SUIT NO. FHC/L/CS/840/2023, Union Bank stated, among other things, that “the bank’s shares shall be delisted from NGX”, and “all the shares of the bank that were lodged with the CSCS shall be transferred to Titan Trust” after the shareholders endorse the Scheme of Arrangement at the planned meeting.
The corporate communication dated May 16, and jointly signed by the Company Secretary, Union Bank of Nigeria Plc, Somuyiwa Sonubi, and Partner, Abubakar G. Anafi of G. Elias, further stated that:
“The holders of the Scheme Shares to be paid the scheme consideration by Titan Trust Bank Limited for the transfer of the said scheme shares. That as consideration for the transfer of the scheme shares, each holder of the shares shall receive N7.00 (Seven naira) per share transferred.
“That the NGX and the Central Securities Clearing System Plc (CSCS) shall be notified and requested to terminate trading in the shares with effect from the Eligibility Date and no trading or transfer of the Bank’s shares shall be registered after that date.”
According to the notice, the bank shall seek a resolution to authorise the Board of Directors to “take all necessary steps and to consent to any modifications of the scheme of arrangement that the Federal High Court or the Central Bank of Nigeria (CBN) or the Securities and Exchange Commission (SEC) may deem fit to impose or approve, or that may otherwise be required.”
By the Order of the Court, the Chairman of the Board of Directors, Farouk Mohammed Gumel, has been appointed to preside over the meeting, or in his absence “any other director appointed in his stead by the shareholders present at the meeting to act as Chairman of the said meeting” in which the presiding chairman is required to report the results thereof to the Court.
The statement noted that voting at the meeting will be by poll and that shareholders may vote in person, or appoint another person, whether a shareholder or not, to attend and vote in their stead.
In compliance with NGX requirements, Titan Trust Bank Limited, the majority shareholder in Union Bank, will not be voting at the Court-Ordered Meeting and has informed Union Bank that it, its nominees, associates, related parties, or other parties acting in concert, will not exercise its voting right at the meeting.
After this process, Union Bank ceases being a public quoted firm, and will revert to a private company – a status the minority shareholders consider demeaning for Nigeria’s second-oldest financial services institution.
The share price of Union Bank Nigeria (UBN) is NGN 7.00. UBN closed its trading day on Tuesday, May 16, 2023 at 7.00 NGN per share on the Nigerian Exchange (NGX).
Union began the year with a share price of N6.40 and had gained 9.38% on that price valuation, ranking it 58th on the NGX in terms of year-to-date performance on the date of the announcement.
Union Bank of Nigeria is the 62nd most traded stock on the Nigerian Stock Exchange over the past three months (Feb 10 – May 16, 2023).The stock had traded a total volume of 34.3 million shares—in 977 deals—valued at N239 million over the period, with an average of 544,441 traded shares per session. A volume high of 13.9 million was achieved on May 9th, and a low of 9,702 on April 28th, for the same period.
Shareholders who spoke to THEWILL expressed disappointment and anger over the dwindling fortune of Nigeria’s second old generation bank. They argued that years of prolonged bad management and poor oversight by the regulatory authorities contributed to bringing the bank to the Lilliputian status it now chose to embrace.
The National Coordinator, Independent Shareholders Association of Nigeria, Prince Anthony Omojola, condemned the move which he also described as an abuse of trust because the core investors did not give the impression that they would go that way when they acquired the bank in June 2022.
According to Omojola, Union Bank was a victim of poor corporate governance and weak regulatory oversight.”That is why people can do whatever they like,”.
In a chat with THEWILL, National Coordinator, Pragmatic Shareholders Association, Mrs Bisi Bakare, called for a review of Nigeria’s extant investment rules to check the excesses of foreign investors who take undue advantage of the weak system.
“Look at Union Bank, one of Nigeria’s biggest banks, and see where it is today – delisting from the Exchange to become a private enterprise which is very unfortunate. They have the right to play in any category, but the bank was badly run,” Mrs Bakare argued.
In his comment, Chairman, Trusted Shareholders Association of Nigeria, Alhaji Mukhtar Mukhtar, recalled similar cases in the past when core investors pursued ulterior motives that led to the eventual eclipse of the firms. “It is not a good development for a small bank like Titan to acquire Union Bank only to delist from the Exchange and it becomes a private enterprise.”
All the respondents envisaged mass lay-off of workers and downsizing of Union Bank.
“Titan Bank may downsize by closing down some branches of Union Bank and sending workers away,” said Boniface Okezie, National Coordinator, Progressive Shareholders Association of Nigeria.
When contacted by telephone, Head of External Communications and Media Relations of Union Bank, Jennifer Ugboh, asked that the question already sent to her by WhatsApp be forwarded by e-mail which did not meet production deadline.
TitanTrust Bank Limited brought to closure the deal that enabled it to purchase a controlling stake in Nigeria’s second-oldest lender in June 2022.
The lender, backed by a former Central Bank of Nigeria deputy governor, Tunde Lemo, set out to acquire 89.4 per cent interest in Union Bank from a pool of stakes from then exiting major investors, including British Virgin Islands-based Atlas Mara and Union Global Partners Limited, but later upped the stake to 93.4 per cent.
The delisting of Union Bank from the Nigerian Exchange is coming 52 years after the 106-year-old financial services institution was quoted on the Nigerian bourse in 1971. Union Bank was founded in 1917 as Colonial Bank before changing its name to Barclays Bank in 1925.
The current market capitalisation of Union Bank is N203.85 billion with a total of 29.12 billion shares outstanding as of Friday, May 19, 2023.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
