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Sterling Bank, First Rand Merger Talks Gain Ground

By on April 14, 2011

The talks between Sterling Bank Plc and FirstRand, the second biggest bank in South Africa about the latter making a strategic investment in the former has reached an advanced stage, Reuters said Wednesday.

Reuters quoted Sterling Bank’s Financial Controller, Adebimpe Olambiwonnu, to have made this remark on CNBC Africa television.

Olambiwonnu said: “Injecting more capital into our business, that’s the only way we can expand. With FirstRand, yes, discussions are ongoing. We are quite positive. They are still at the due diligence stage and more information will be given subsequently.”.

THISDAY had on March 17, reported that both banks were in advanced talks. Sterling Bank was not affected by the Central Bank of Nigeria (CBN) 2009 reform exercise which resulted into the bailout of some banks that were declared sick.

THISDAY check Wednesday showed that Sterling Bank share price maintained its previous day’s value of N2.19 per share at closing bell. The bank’s total market capitalisation stood at N27.51 billion as at Wednesday.

On the other hand, FirstRand which commenced business in 1998 was founded originally as specialist investment bank. Since then, the founders, together with a long standing and stable management team, have created the second largest financial institution in South Africa. The founders still retain a significant equity stake in FirstRand.

Bloomberg quoted Banking Analyst for Renaissance Group in Lagos, Mr. Adesoji Solanke, to have said that Sterling was already trading at a 28 percent premium to its peers in Nigeria and FirstRand’s pricing “will likely be in excess of the 28 percent premium above peers,”

“Sterling Bank, with a 100-branch network is better positioned at the dealing table with a potential acquirer, but the focus of the market still remains the price,” Solanke said.

Banking sources said FirstRand preferred to enter the Nigerian market through a strategic alliance with a healthy local bank and would be looking to deploy around $300-$400 million to fund such an investment, Reuters said.

Source : Thisday