Low Offer Linked to FBN, Oceanic Merger Failure

Sources further confirmed that the speculation that the Ibru family, as shareholders, may have rejected the offer was unfounded.

This was because part of the terms of the plea bargain which Mrs. Cecelia Ibru, former chief executive of Oceanic Bank, entered into with the Economic and Financial Crimes Commission entailed forfeiture of the Ibru family shares in the bank.

As a result, the Ibru family shareholding in Oceanic Bank has been whittled down considerably.

An Oceanic Bank official maintained that it was the board and management of the  bank that turned down the offer, adding that    the Ibru family did not influence the acquisition negotiations.  The official also confirmed that Oceanic Bank considered FBN’s offer too low.

He disclosed that his management and board had issues with the offer because they felt FBN was trying to take advantage of the situation and was deliberately buying the bank cheap.

In their estimation, FBN was not really interested in the transaction and might have gone into it to please the Central Bank of Nigeria.

Those in the know said FBN was encouraged by the apex bank to help clean up the mess created by the former management of Oceanic Bank.

Industry sources conversant with banking mergers and acquisitions further disclosed that FBN might have decided to withdraw from the deal as a result of its experience in 2005 when it acquired MBC International Bank.

FBN at the time was extremely disappointed following that particular acquisition when it discovered that MBC concealed a lot of information and legacy debts in its book. This compelled the board of directors of FBN to move against some of the executive management staff it had acquired from MBC and forced most of them to quietly resign from FBN.

One of the notable people affected during the purge was Kojo Majekodunmi, former managing director of MBC, who had been absorbed into FBN as executive director following the acquisition of his bank.

Referring to that particular instance, industry sources said that FBN may have been concerned that if it acquires Oceanic Bank, it could cause it more harm than good. This may have informed FBN’s decision to make a very low offer for the shares of Oceanic Bank.

“In other words, FBN was playing safe by discounting unforeseen liabilities and legacy debts that might crop up against its offer,” explained an industry source.

Meanwhile, the breakdown of negotiations took its toll on the shares of Oceanic Bank last week.

Last Tuesday, Oceanic Bank stock suffered the highest decline in the banking sub-sector, shedding 10 kobo, representing the maximum 5 percent daily limit . The bank shares closed at N1.90 kobo from N2.01 the preceding trading day, its biggest intraday decline since April 12.

Its share price continued its downward trend up till Thursday when it traded for N1.72 per share.

FBN last week had explained that it ended negotiations with Oceanic to pursue its “organic growth”.

According to Bisi Onasanya, group managing director of the bank, “We had always been clear from the beginning that we would only do a deal that would bring value to our shareholders”.

Onasanya said: “For First Bank, we actually welcome this development. We like the underlying turnaround strategy that is under way at First Bank and given the size and potential within its own franchise and balance sheet, we always thought that M&A was an unnecessary development at this juncture for the bank to deliver further value from the underlying franchise.

“M&A generally works on paper but history tells us that the majority of deals are value-destructive, and few deliver value in year one.”

Meanwhile, the management of Oceanic Bank moved to reassure its shareholders that it is working at concluding other recapitalisation plans, details of which will be unveiled in the next couple of weeks.

Source : Thisday