Nigeria's Access Bank to Buy Struggling Carlyle-Backed Rival

(Bloomberg) -- Nigeria’s Access Bank Plc agreed to take over struggling local rival Diamond Bank Plc in a deal worth about $200 million that would create the nation’s biggest lender by assets. Both companies’ shares rose.

Access will buy Diamond for 72.5 billion naira ($199 million), with almost a third of that being paid for in cash and the rest in shares, the Lagos-based lenders said in statements to the Nigerian Stock Exchange on Monday. The offer price of 3.13 naira per share is more than triple Diamond’s previous closing price.

Carlyle Group, the U.S. private-equity firm, bought almost one-fifth of Diamond in 2014, its first-ever Nigerian deal. Since then, the value of the stake has tanked amid an economic slowdown in the oil-driven economy that sent bad loans soaring. The lender was downgraded by both Moody’s Investors Service and S&P Global Ratings last month to triple-C.

“The merger will be a positive for Access Bank,” Lagos-based CSL Research said in a note to clients. “Diamond Bank has a strong retail franchise, especially on the liability side, giving it the lowest funding cost among peers.”

If the takeover is approved, Access’s assets could swell to about $17 billion from $12.5 billion, according to Bloomberg calculations. Zenith Bank Plc is currently the largest Nigerian lender, with $15.4 billion of assets. The Central Bank of Nigeria gave its green light for the merger on Monday, ThisDay newspaper reported. A CBN spokesman wasn’t immediately reachable for comment.

Nigeria's Access Bank to Buy Struggling Carlyle-Backed Rival

The combined entity will have the largest number of retail customers in Africa, Diamond said in a statement. Citigroup Inc. and Chapel Hill Denham, a Lagos-based investment bank, are advising Access on the deal while Exotix Capital is advising Diamond.

The offer is a 260 percent premium to Diamond’s closing price of 0.87 naira a share on Dec. 13. Its stock has risen 20 percent this week to 1.14 naira in Lagos, still far below the offer price, but paring its losses this year to 24 percent.

Access has climbed 7.4 percent since the announcement to 8 naira.

Nigeria’s banking sector faced government bailouts after a credit crunch in 2009. While the country’s biggest lenders now have strong capital buffers and solid earnings, small ones have been struggling to recover from the economy’s contraction two years ago. In September, Skye Bank collapsed and the central bank established Polaris Bank to take over its assets and liabilities. It asked state-owned Asset Management Corp. of Nigeria to capitalize the new entity.

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