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Nedbank to buy 20% stake in Ecobank for $500m

By The Rainbow
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NEDBANK Group, controlled by Old Mutual, said on Wednesday it will buy one-fifth of Ecobank Transnational in a deal valued at more than $500m.

The Chief Executive Officer (CEO) of the South African bank, Mike Brown, was quoted in several reports as saying the  bank would take up its right to convert a $285m loan made to Ecobank in 2011 into an estimated 11 per cent  stake.

In addition, Nedbank will also take a second subscription right to increase its holding in Togo-based Ecobank to as much as 20 per cent.

Under an arrangement with Ecobank, Nedbank has an option to convert the loan to shares and increase its stake in the West African bank to 20 per cent. It has one year window to exercise that choice if choses to, beginning from December 2013.

Brown, however, did not give any time frame for the plan.

“It is our current intention to exercise our rights,” he wrote in an e-mailed response to questions, saying that the bank has not taken a formal decision to proceed. “We have always anticipated that the total cost to get to a 20% shareholding will be greater than the original loan.”

Ecobank reported in October that profit rose 65% to $250m in the nine months through September, as its businesses in Nigeria and Ghana expanded.

While Ecobank has the reciprocal right to buy a stake in Nedbank, CEO Thierry Tanoh said in May that it may delay taking this option to focus on its African operations. Nedbank has a 12-month window, starting next month, 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, Johannesburg, Dubai and London.

The Public Investment Corporation bought almost 20% of the lender in April last year, making it Ecobank's biggest shareholder.

Ecobank chairman Kolapo Lawson plans to step down on December 31 amid allegations of fraud being probed by Nigeria's capital markets regulator.

The Financial Times reported in October that people familiar with the matter said Mr Lawson agreed to go after board members had decided his departure was necessary to restore confidence among depositors and shareholders, after a drawn-out controversy, and boardroom battle, over governance issues.

This began when Nigeria's central bank wrote to Ecobank in April drawing attention to Mr Lawson's alleged failure to repay debts to the bank set up in Nigeria in the wake of a 2009 banking crash to absorb nonperforming loans.

Nedbank fell 0.4% to R209 as at 9.39am in Johannesburg trading on Wednesday, paring this year's gain to 11%.

The six-member FTSE/JSE Africa Banks Index advanced 3.6% over that period.

Bloomberg, with Financial Times