Milost Global, a New York based private equity firm is in Nigeria to close the acquisition of tier-two lender Unity bank plc, two sources familiar with the matter confirmed to BusinessDay.
If a deal goes through for Unity, it would be the third investment made by Milost in 2018 alone, following the acquisition of luxury real estate player, Primewaterview limited for $1.1 billion (N396 billion) and a N350 million facility for maritime services firm, Japaul Oil.
“A deal is in the works for Unity bank and a due diligence process is ongoing,” a source told BusinessDay on condition of anonymity.
“They (Milost) flew into the country last week and are currently holding talks with stakeholders for a possible acquisition,” the source added.
Unity’s share price fell 9.2 percent to N1.48 as of Tuesday, February 20, according to Bloomberg data. The tier 2 lender has a market capitalisation of N17.8 billion and its one-year return of 78 percent is among the top three banks with the highest return in the period.
The bank’s net income in the three months through September 2017 was N352 million.
According to its full-year 2016 financial report, Unity’s shareholding structure is dominated by bad bank, Asset Management Corporation of Nigeria (AMCON) which owns 4.02 billion shares and accounts for 34.42 percent of total outstanding shares.
Pan African Capital Nominee holds 1.48 billion shares, which works out to 12.67 percent, while Thomas Etuh, IBAD Limited, and EL-Amin Ltd hold 1.05 billion, 717.7 million and 615.88 million shares respectively. Their holdings work out to 9.01 percent, 6.14 percent and 5.54 percent of total outstanding shares.
It is no surprise that a foreign private equity firm is interested in acquiring a Nigerian bank, according to Taiwo Oyedele, head of tax and regulatory services, PWC, said.
“Ultimately the interest of depositors and other stakeholders are more critical than who owns the bank so this is a positive development,” Oyedele said.
Oyedele noted that the economic challenges of the past few years have increased the vulnerability of some banks and other businesses.
This is reflected in the high non-performing loan ratio in the banking sector. The challenges also reflect in the depressed stock values of listed banks, however the long term fundamentals of the sector remains promising.
Most financial and investment analysts believe that Nigerian banks would have to shore up their capital base this year, which could result in increased rights issue, IPO, mergers and acquisitions.
Nigerian banks have been battling with the problem of huge Non-Performing Loans (NPLs) occasioned by Nigeria’s first economic recession in a quarter of a century.
Tier-two lender Skye bank was too weak to weather the storm, leading the central bank to intervene to bail the bank in 2016.
However, things have started to look up since the rally in oil prices and improved dollar liquidity.
The NPL ratio of deposit money banks stood at 15.18 percent as at September 2017 from 10.13 in December 2016, while their loans and advances declined by 1.3 percent to N15.9 trillion in September 2017 from N16.1 trillion in December 2016, data made available by the Nigeria Deposit Insurance Corporation (NDIC) indicated.
Milost’s senior leadership team that is headed by Managing Partner & CEO, Kim Freeman and Senior Partner & Chief Investment Officer Solly S. Asibey landed in Nigeria on Sunday February 18, 2017, accompanied by Isilo Capital Partners’ team that is led by CEO Tiny Diswai, on a one week visit.
Milost had earlier showed interest in the bank which has over 250 branches, and has now returned to Nigeria to conclude the acquisition, another source told BusinessDay.
Unity bank has some 24o bank branches.
According to its website, Milost says the purpose of its African tour among other things in Nigeria is to meet up with the management of our portfolio companies such as Primewaterview Holding Nigeria Limited recently acquired for $1.1 billion, Femab Properties Limited; Japaul Oil & Maritime Services Plc to discuss concluded deals and other current transactions among those includes the closing of a large Nigerian bank acquisition which was previously announced.
Milost last year announced a $255 million financing term sheet for capital Bank of Mongolia Ltd and Soyombo Insurance Ltd, their sister company, the financing is expected to be comprised of $55 million in equity capital and $200 million in debt.
Milost will also be meeting with government officials that include the Central Bank, Nigerian Stock Exchange, the Ooni of Ife among others.