In the last six months, Unity Bank plc has taken steps to re-invent and reposition itself within the Nigerian banking industry by re-invigorating its board and management team.
Early this week, the bank held a completion board meeting in Lagos, where it got necessary approvals from parties involved and regulators in a move to raise its market capitalisation from N19.223 billion to N58.446 billion via rights issue and private placement.
Industry analysts say the dual capital raise would put the the bank on firm footing by providing additional working capital and meeting the regulatory guidelines as set by the Central Bank of Nigeria (CBN).
Next week, precisely on Monday, May 12, 2014, the bank will open the acceptance list for the offer of 38,446,689,710 ordinary shares of 50 kobo each at N0.50 kobo per share by way of rights to its existing shareholders.
It is also set for a Private Placement exercise of 40 billion ordinary shares of 50 kobo each at N0.50 kobo per share.
From the Rights Issue, which is on the basis of 1 ordinary share for every 1 ordinary share held as of December 16, 2013, Unity Bank targets to raise N19.2 billion, while from the Private Placement, the bank targets to raise N20 billion.
Acceptance list for the Rights Issue opens on May 12, 2014, and closes on June 18, 2014, while placing for the Private Placement opens on June 20, 2014, and closes on June 23, 2014. Post offer, the bank will record growth in market capitalisation from N19.223 billion to N58.446 billion.
Purpose of the rights offer and use of the proceeds
The primary purpose of the rights offer is to enable the bank to shore up its capital adequacy in compliance with the CBN directive on capital adequacy for banks in Nigeria based on the new prudential guideline. The bank’s capital raise will improve the debt/equity mix, increase internal capacities for large ticket transactions, improve its information technology and expand its branch network.
The estimated net proceeds of the Rights Offer estimated at N18.68 billion after deduction of the total cost of the Rights Offer will be applied as follows: Branch Development and Renovation; Information Technology upgrade; Products and Channel upgrade; human resource development; corporate communication; and enhancement of working capital.
In a bid to reach the high unbanked population in the country and increase the customer convenience, the bank would deploy 15 percent of the proceeds to building new branches. In order to improve operational efficiency and ensure customer satisfaction along all touch points, the bank would upgrade its IT infrastructure network connectivity, data centre infrastructure, and application management. In view of the expected increase in the customer base of the bank, and the need to ensure that the bank products and services are easily accessible to its customers, 30 additional ATM machines and 1,500 POS terminals would be acquired by Unity Bank plc from the offer proceeds.
The bank also recognises the importance of its human recourse as key to achieving competitive advantage and in view of the changes in industry architecture, informed by shift in customer preferences. Unity Bank plc intends to deploy 5 percent of the capital to be raised on strategic investments in projecting its brands through various media platforms to create a more recognizable brand and image while allowing the bank to achieve more visibility and improved market presence. In addition to the aforementioned, considering the need to expand its business by taking a larger share of the market, the bank requires additional capital to improve its lending capabilities, albeit keeping its core focus on the retail funding segment of the market. The injection of additional working capital would also improve the bank’s capital adequacy ratio.
Board/management view
Nu’uman Barau Danbatta, chairman, Unity Bank, said during the completion board meeting to announce the offer that “this is a good step in the history of the bank,” adding that “it can only get better.”
“I am confident that the robust strategic plans put in place by the board and the expected success of the capital raise will put our bank on a firm footing to compete effectively locally and internationally. I believe that these steps will return the bank to sustainable profitability and ensure adequate returns to all shareholders as projected by the board,” he added.
“The more fundamental is the underlying changes we are making in the bank. A complete restructuring is going on. Considering where we are coming from and the challenges environment, the bank is ready to run –in terms of corporate governance structure and management expertise,” Danbatta said.
Henry James Semenitari, managing director, Unity Bank plc said, “This is a new dawn in the history of Unity Bank plc.” He added: “The offer proceeds will be judiciously utilised in line with best practice as contained in the offer document.”
The bank’s five-year profit forecasts
The directors of the bank are of the opinion that subject to unforeseen circumstances, the bank’s profit after taxation for the years ending December 2014, will be N8.6333 billion – 2015, (N14.267bn) – 2016, (N23.917bn) – 2017, (N30.987bn), and 2018 (N34.139bn).
The bank said the financial projections are based on expected proceeds from the rights issue, and expected proceeds of private placement from AMCON.
The bank noted that this investment from AMCON has two exit strategies as contained in AMCON’s term sheet, “wherein the core investors of the bank could buy back (in whole or part) at the initial agreed issued price plus 14 percent premium (current spot MPR +2%) at the end of one year; or the core investors will be required to pay the 14 percent premium (current spot MPR +2%) fee at the end of the first year if unable to buy back and extend for an additional year up to a maximum of two year.”
Professional parties to the offer
Interstate Securities Limited is the Issuing House to the offer; Newdevco Investment and Securities Limited is the lead stockbroker to the offer; while Capital Assets Limited and APT Securities Limited are joint stockbrokers to the offer. Unity Registrars Limited is the registrars to the offer; Wali Uwais & Co are solicitors to the bank; while Paul Usoro & Co are Solicitors to the offer. Other professional parties to the offer are: Ahmed Zakari & Co (auditors to the offer); PKF Professional Services (reporting accountants); while GTBank plc and Heritage Banking Company Limited are receiving banks to the offer.
Unity Bank in history
The bank was incorporated in Nigeria as a private limited company on April 27, 1987, with the name Intercity Bank Limited. It was granted licence on October 28, 1987, to carry on the business of commercial banking and commenced full banking business operations on October 28, 1988. The bank was converted into a Public Limited Liability Company on September 8, 1992. Following the consolidation reforms introduced and driven by the CBN’s policy of N25 billion commercial banks’ minimum capital in 2004, the bank on December 22, 2005, merged with Centre Point Bank plc, First Interstate Bank plc, Pacific Bank Limited, Societe Bancaire Nigeria Limited, and Tropical Commercial Bank plc. On December 30, 2005, it changed its name and further on March 2, 2006, merged with other banks – Bank of the North Limited, New Africa Bank plc, and NNB International Bank.
Iheanyi Nwachukwu