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Banks Consolidation: CBN Wants Detailed Plan Jan 7
•Rolls out merger/take-over procedure manual •NSE endorses Intercontinental Bank's claim on returns By Ayodele Aminu, 12.13.2004
The Central Bank of Nigeria (CBN) has directed banks to submit to it not later than January 7 next year their detailed plans for achieving the on-going consolidation/recapitalization exercise billed to be completed before the end of December 2005. It has also rolled out a draft copy of the procedure manual for processing applications for bank mergers/take–overs. A CBN circular entitled "Submission of Detailed Plan of Action Re:Bank Consolida-tion/Recapitalisation Program-me," signed by its Director of Banking Supervision, Mr. Ignatius Imala, explained that the deadline for submission of detailed plan on consolidation was to enable the apex bank monitor the progress of banks on the issue. "This is a follow-up to the current consolidation/recapitalization programme in the banking system. Barely twelve months to the deadline, the CBN needs to keep a clear record of plans of each bank so as to enable it monitor progress. "Consequently, and as the detailed requirements/procedure manual is being rolled out, all banks are required to submit to the CBN, not later than 7th January, 2005 their detailed PLANS for achieving the required consolidation/recapitalisation showing the key activities and timeliness, among others," stated the circular which was sent to all banks at the weekend. Thereafter, the CBN maintained that it "will carry out monthly monitoring of the progress made by all banks against the benchmarks. The progress report will be published periodically." "All banks are hereby advised to comply, please," added the circular dated December 9, 2004 with reference number BSD/14/2004. Going by the draft copy of the procedure manual for processing applications for bank mergers/take - overs obtained by THISDAY and on which chief executive of banks are expected to make their views and comments tomorrow at the 276th meeting of the Bankers' Committee, the CBN stated that "there shall be three stages of approvals for mergers-pre-merger consent, approval-in-principle and final approval and two stages of approval for take-overs - approval-in-principle and final approval.'' Pre-merger consent has to do with CBN's preliminary consent to the bank wishing to merge to the effect that it has no objection to the proposed merger. This, according to the CBN, would enable the merging bank to forward its application to the Securities and Exchange Commission in accordance with the ISA 1999 for processing and approval. Within a maximum of five working days of the receipt of an application seeking for pre-merger consent, the CBN shall issue a 'no-objection' letter or a rejection letter, informing the applicants of the reasons for rejection, the document explained. Approval-in-principle on the other hand represents CBN's conditional approval of the merger or takeover. Within a maximum of 10 days of the receipt of an application for merger approval not involving fresh capital injection, the CBN is expected to issue an approval-in-principle or reject the application and inform the applicant the reasons for rejection. ''Where an application for merger involves fresh capital injection, approval in principle will be issued to the applicants within a maximum of ten working days. Where the application is rejected or part of the fresh capital injection is not recognized, the applicants will also be informed within a maximum of 10 working days of the receipt of the application,'' the apex bank further explained. Final approval, according to the draft, shall be given after the merger or take-over has been approved by the Securities and Exchange Commission or on presentation of take-over application to CBN. ''The successor bank, in the case of a merger, will then be issued a new banking licence. The banking licence(s) of the relinquent bank(s) (in mergers and takeovers) shall be withdrawn and cancelled. ''Final approval shall be conveyed to the successor bank or the acquiring bank within a maximum of 10 working days of the receipt of the application for the approval,'' added the CBN. The CBN, however, listed the documents required for pre-merger consent to include a formal application by the merging banks addressed to the Governor of CBN and signed by the chairmen and managing directors of each of the merging banks. It should be accompanied by the following: the proposed name of the successor bank, MOU between the merging banks, current Memorandum and Articles of Association (MEMART) of each of the merging banks approving the merger as well as resolution of the shareholders at the AGM or EGM. Also to accompany the application are lists of significant shareholders of the existing banks (i.e. shareholding of 5 per cent and above) showing their names, business and residential addresses (not P.O Box); organizational structure, showing functional units, reporting relationships and grade (status) of heads of departments/units of the merging banks; list of directors, designation and the interest they represent in the merging banks; lists of the top management team (AGM and above) of the merging banks and their designation as well as copies of CBN approvals of the appointments of directors and top management team. Merging banks seeking approval- in-principle are required to forward to the CBN the following documents: draft memorandum and articles of association of successor bank; list of significant shareholders of the successor bank (i.e. shareholding of 1 per cent and above) showing their names, business and residential addresses (not P.O Box); organizational structure, showing functional units, reporting relationships and grade (status) of heads of departments /units of the successor bank and list of directors, their curriculum vitae, designation and interest they represent in the successor bank. Other documents to be forwarded for approval-in-principle include list of proposed top management team (AGM and above), designation and their detailed curriculum vitae; business/strategic plan of the successor bank for the next five years showing how the integration process will be managed, future goals and operations, branch expansion/rationalization, treatment of surplus staff and staff retained, etc; method of valuation agreed to by the banks; draft scheme of merger as well as due diligence report on each of the merging banks. Documentary requirements for final approval include formal application accompanied by the following documents; original banking licence(s) of the merging bank(s), the scheme of merger approved by the SEC, certificate of incorporation of the successor bank. Cerified True Copy (CTC) of CAC form 2.5 - return of allotment, CTC of CACA form 2.3 - particulars of directors and CTC of form CAC 6 - location of principle place of business. Also to be included are evidence of de-registration of the relinquent banks by CAC, SEC final approval of the merger, a signed undertaking from each proposed director that he/she will comply with code of conduct for directors as the CBN shall from time to time prescribe, opening statement of affairs showing the details of the capital base, evidence of stamp duties paid to Federal Inland Revenue Service on the new authorized share capital, schedule of disengaged staff, including the total severance package and mode of settlement as well as schedule of retained staff, including their placements. Banks desirous of taking over other banks, according to the draft manual, are expected to produce a formal application by the acquiring bank addressed to the Governor of the CBN and signed by the chairman and managing director, accompanied with the following - a copy of takeover bid stating full names and business addresses of the offeror; date the directors of the offeror bank gave their approval; the maximum number of shares to be required; the price and terms of the acquisition; the valuation method used and due diligence report on the bank(s) to be taken over; memorandum of information/understanding and memorandum and articles of association of the acquiring bank. Also included in the list of accompanying documents are resolution of the board of directors of the acquiring banks approving the take-over; certificate of incorporation of the acquiring bank; list of significant shareholders of the acquiring bank (i.e. shareholding of 1 per cent and above) showing their names; list of proposed top management team post take-over (AGM and above), designation and their detailed curriculum vitae, business and residential addresses (not P.O. Box); organizational structure of the acquiring bank post take-over, showing functional units, reporting relationships and grade (status) of heads of departments/units; list of directors, their curriculum vitae, designation and interest they represent; copies of CBN approvals of the acquiring bank for the next five years showing how the integration process will be managed, future goals and operations, branch expansion/rationalization, treatment of surplus staff and staff to be retained etc. Documentary requirements for final approval include CTC of CAC form 2.5 - return of allotment; CTC of CAC form 2.3 - particulars of directors; CTC of form CAC 6 - location of principle place of business; evidence of voluntary liquidation/winding up of the acquired bank(s); original banking licence(s) of the acquired bank(s); evidence of stamp duties paid to the Federal Inland Revenue Service on the new authorized share capital base; schedule of disengaged staff, including the total severance package and mode of settlement, schedule of retained staff, including their placements. Meanwhile, the Assistant Director General of the Nigerian Stock Exchange (NSE), Mr. Lance Elakama, said Intercontinental Bank’s claims that the return on its investment is 106,000 per cent is actually an understatement. ''When we saw those advertisements, the figures of over 100,000 per cent returns, we beat the numbers together and we were convinced that even that figure on returns was an underestimation. We are convinced that the numbers are correct. When we went for a meeting some people were trying to pick a hole in the figures. But on investigations we found out that those numbers were even underestimated. All I can say to the public is that this is a bank of the moment and of the future," says Elakama Nigerian Stock Exchange's General Manager, Quotations and Listings, Mr. Binos Yaroe, in the same vein explained that "those figures when converted into dollars are underestimated and conservative. We have cross checked it and found out they are true and I don't think there is any investment in this world that can match this." He added that the NSE is confident in the ability of the Intercontinental Bank to continue to deliver impressive returns to shareholders and therefore urged investors to embrace ongoing public offer. Though the bank is offering 2.75 billion shares at N6.00 per share, NSE daily official trading records indicate that since the offer opened November 16, 2004 about 16 million shares have been traded at the Stock Exchange at a price of N7.81 kobo. The Vice Chairman and Chief Executive of the bank, Dr. Erastus Akingbola, stated that the board of directors of the bank had already learnt from the mistake of the other banks and has pre-empted a situation whereby large volume of subscription are not allotted. He said the bank has made provision to allot excess subscription up to a limit to be allowed by the Securities and Exchange Commission and the NSE.
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