Debate over AMCON sale of Keystone Bank to Sigma

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What manner of sale?

When the Asset Management Corporation of Nigeria (AMCON) announced the sale of Keystone Bank to Sigma Golf Nigeria Limited and Riverbank Investment Resources Limited (the Sigma Golf-Riverbank Consortium) recently, it didn’t envisaged that the process would be subjected to some sort of public scrutiny at all since in its reckoning the deal was in a manner of speaking a very simple matter!

But stakeholders don’t consider it a simple matter as such as they have expressed concerns bordering on the lack of transparency of the entire process.

The Keystone Bank, previously known as Bank PHB, was among the three banks nationalised by the CBN in 2011, after failing a stress test conducted by the apex bank.

Crux of the matter

At issue is that some analysts have described the process which led to the sale of the bank as an exercise lacking in “proper due diligence.”

The sale of the bank, the analysts alleged, was done without following extant takeover provisions.

At the risk of being accused of making vacuous pontification, these critics based the plank of their arguments on certain incontrovertible facts as follows:

According to these critics, the audited financial statement of the bank for the period ended June 30, 2015 showed that Keystone Bank had total assets of N317.6 billion with a customer loan of N98.2 billion, deposits of N245 billion and total equity of N18.9 billion.

As at April 2016, the bank had a staff strength of 1,753 employees, network of 154 branches, nine cash centres and 315 Automated Teller Machines.

Judging by the bank’s fundamentals, they therefore wondered why the bank which such high networth should not be able to attract a better deal compared to what it got if AMCON actually didn’t undervalue the company.

Besides, a global search on the two firms which acquired the bank did not reveal any existing profile or transaction beyond the deal with AMCON on the Keystone Bank transaction, a development which further cast a cloud of doubt on the process.

Stakeholders cry foul

Among the stakeholders that have raised their voices above the din over the controversial sale of Keystone Bank are the different shareholder groups.

In an interview with our correspondent, Sir Sunny Nwosu, National Coordinator, Independent Shareholders Association of Nigeria (ISAN), said the problem of the nationalised bank was caused by the government agencies including the Central Bank of Nigeria and Nigeria Deposit Insurance Commission.

Raising some posers, Nwosu queried why the CBN decided to disobey court rule over the planned sale of the bank in the first place rather than allowing the law to take its course.

“How can they sell BankPHB for N25billion? Who are those behind it, what is the value of the bank with over 150 branches? The size of their head office alone is worth a lot and you sell all that for just N25 billion?”he queried.

Echoing similar sentiments, Chairman, Progressive Shareholders Association of Nigeria, PSAN, Mr. Boniface Okezie alleged that the controversial sale of the Keystone Bank was at a huge loss to shareholders and investors alike.

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AMCON, he stressed, has a lot of questions to answer concerning the way and manner it disposed the bank.

In the view of Opeyemi Adebayo, a financial analyst, the latest sale like the previous ones would definitely serve as a litmus test for AMCON as far as transparency is concerned.

However, unlike the trio of Nwosu, Okezie and Adebayo, David Adonri an economist and stockbroker would rather err on the side of caution.

According to him, judging by the caliber of those who undertook the sale, it is almost certain that the right presumptions were followed.

“Because the bank was not listed in the stock market, we can’t say it had appropriate market price per share and so the seller must have used other valuation like net asset value and arrive at what it think is the worth of the bank and also add good will and so on to offer it at that price. But I think that amount is not a bad amount. Don’t forget that the bank almost collapsed before federal government rescued it.”

Also commenting on the deal, Sola Oni, a chartered stockbroker and Chief Executive Officer, SOFUNIX Investment and Communications Limited said, “The sale of Keystone Bank was not a sudden flight. It must have undergone a structured regulatory approval including the capital market regulators. The complaint is a function of who is talking, quality of complaint and appropriateness in terms of timing. We expect a major turnaround of Keystone soon. The involvement of AMCON is a rescue mission. The new buyers have considered the risk and return trade-off before taking over the bank.”

Like Oni, Chidi Agbapu, Co-CEO/Managing Director, Planet Capital Limited, said the whole argument over the undervaluation of the assets of Keystone Bank is uncalled for.

“Before you say something is under price or overprice relative to what value, the only person who is in a position to say is over price or underpriced is the person who has look through the asset, liability of profile the institution in question. I can’t volunteer and inform opinion that we be guess work. I want to believe that those who handled this transaction hired expert and professionals to do the work.”

Mr. Emeka Madubuike, the immediate past chairman of Association of Stock Broking House of Nigeria (ASBHN) however offered a more dispassionate view of the bank’s status.

While noting that there is need to look at the value of the business itself before making any categorical statement about the propriety or otherwise of the due diligence analysis, Madubuike emphasised that: “You need to look at their books before you say the value was under-priced because as at the time the bank was being managed by AMCON it had no value and the shareholders’ fund was negative.”

AMCON’s plausible explanation

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However, in a statement, AMCON stated that the consortium of Sigma Golf Nigeria Limited and Riverbank Investment Resources were made of local investors. Specifically, AMCON said the emergence of the Sigma Golf-Riverbank Consortium resulted from a rigorous and competitive bidding process, which was coordinated for AMCON by Citibank Nigeria Limited, its affiliates and FBN Capital (joint financial advisers), and Banwo & Ighodalo, and Crosswrock Law (joint legal advisers).

Sigma Golf Nigeria Limited and Riverbank Investment Resources, the Corporation empahsised, were entities set up by local investors, adding that the process for the sale of the bank started with interest shown by 18 parties cutting across local and international investors.

Speaking in an interview with The Nation AMCON’s Head of Corporate Communication, Jude Nwauzor refuted claims that the sale of the bank had underhand deal of any sorts as being suggested in some quarters.

“It was Citibank that handled the transaction and if you know the pedigree of the bank, I think the world should believe it because they are very outstanding and straight forward. If they sold the bank at that amount that is the value the bank is, it was a very transparent transaction.”

On the details of the bank’s assets and liabilities, the AMCON spokesperson said the Corporation has no such records at its disposal. “We don’t have that. That information should be with CBN because they are the ones who monitor the books of the bank. We don’t, we only concentrate on bad loans we bought.”

While explaining the modus operandi adopted by the national debts undertaker, Nwauzor said most of the sales are done with the sole objective of recouping funds expended on the acquisition of such concerns.

“Before we take over any business our target is to recover our money first. But the case of the bridge banks was different. They were handed over to an interim management under AMCON to stabilise them before sale. This is what we did in the case of Enterprise Bank, sold to Heritage Bank as well as Mainstreet Bank which was sold to SkyeBank. Keystone Bank happened to be the last of the bridge banks disposed off. With this we have realised our money. These things were published both in the local and international newspapers for investors and buyers who showed interest and it was those who met the criteria that got it at the end.”

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