By Alex C
Following the decision to exercise a right to acquire 20 percent stake (4.5 billion shares) in West African banking group, Ecobank Transnational Incorporated (ETI) for $493.4 million (N79 billion), the South African banking group has now emerged Ecobank’s second biggest shareholder.
Nedbank gained the right to buy the shares from Ecobank based on a convertible loan it issued to the pan-African lender in 2011 to purchase defunct Oceanic Bank Plc.
Under the terms of the deal, Ecobank was expected to repay $285 million loan to Nedbank. ETI also took another convertible loan from Public Investment Corporation (PIC), one of its major shareholders which also own shares in Nedbank.
Prior the acquisition announcement, it was not clear if Nedbank will go ahead to exercise the right offered as the deal was shadowed by corporate governance concerns at ETI, a crisis that eventually led to the departure of CEO Thierry Tanoh, erstwhile CEO of Ecobank.
In August 2014, Nedbank CEO Mike Brown told Reuters that Ecobank had made “enormous progress” in resolving its governance issues.
Nedbank’s Managing Executive for Africa, Smit Crouse also acknowledged that transparency in Ecobank’s governance has improved as the bank “have been very transparent in terms of their communication.”
For Nedbank, the acquisition will be its biggest purchase in the past 12 years after it acquired BOE Ltd for $742 million in 2002.
When the acquisition is finalised, Nedbank would be the second largest shareholder after Qatar National Bank (QNB) purchased a 23.5 percent of Ecobank in September. South Africa’s state own Public Investment corporation (PIC) – holding 18 percent – will be the third largest shareholder.