Union Bank Nigeria Plc announced it has reached an agreement to sell a majority stake to Titan Trust Bank Ltd. This is according to a press release published on the Nigerian Stock Exchange. Titan Trust Bank is chaired by former Deputy Governor of the CBN and Chairman of Flutterwave, Tunde Lemo.
The deal will see existing core investors in Union Bank, Union Global Partners Ltd (64.98%), Atlas Mara (25.53%) and other shareholders divest their core holdings totalling 89.39% in Union Bank to Titan Trust Bank. The bank did not comment on the purchase consideration.
The deal suggests a merely 2 years old bank (Titan commenced operations in October 2019) will be acquiring a 104-year-old bank. The deal, when consummated will be one of the most remarkable acquisitions in the Nigerian Banking space after STB acquired UBA in the landmark 2005 deal.
The announcement of the deal also confirms rumours that have made the rounds across financial sector players of a potential sale of Union Bank to a local bank. Back in May, Nairametrics reported a potential acquisition of the bank by Zenith Bank, Access Bank and even Moroccan bank, Attijariwafa.
Union Bank currently has a market valuation of N147 billion trading at a price to earnings ratio of 5.69x. The bank has a net asset of N264 billion and a total asset of N2.56 trillion. The share price gained 10% today as investors who got wind of the deal loaded up the stock. Union Bank is down 5.3% in the last year.
Whilst no purchase consideration was mentioned, Nairametrics estimates this acquisition will cost Titan Bank between N6 and N8 per share or close to N200 billion. Deals like this attract a “control premium” in the region of 40-70% on existing share price, depending on who is more desperate to their buy or sell.
From the comments of the major players in Titan Bank, this deal provides them a unique opportunity to grow market share and compete with the FUGAZ. Union Bank is currently a Tier 2 bank and right behind Stanbic IBTC which has a total asset of N2.7 trillion.
GTB has a total asset of N5.1 trillion, the smallest of tier 1 banks. Others have between 8-10 trillion naira in total assets. Union Bank also has the branch network, technology and brand recognition that can quickly fast track Titan Bank into the mainstream of Nigerian Bank.
Titan Trust Bank currently has just two bank branches located in Lagos. It does not have an Investor Relations Page.
What is in it for Union Bank
This marks the beginning of the end of a very dark chapter for Atlas Mara, the core investor in Union Bank. Since they commenced their pan-African acquisition of banks across Africa, they have gone from one controversy to another. Their share price has fallen by over 90% since trading started in 2013. Their exit, allows Union Bank to chart the course for stability in ownership and management allowing them to recapitalize and reposition for a very competitive financial services sector. Union Bank will likely leverage on the ecosystem of financial services businesses sponsored by the very influential Tune Lemo.
What they are saying
Chair, Union Bank, Mrs. Beatrice Hamza Bassey said:
“On behalf of the Board, we congratulate all the parties involved in reaching this phase of the transaction and the Board looks forward to supporting the next steps to ensure a seamless completion of the process following regulatory approvals.
Chair, Titan Trust Bank, Mr. Tunde Lemo, OFR said:
“The Board of Titan Trust Bank and our key stakeholders are delighted as this transaction marks a key step for Titan Trust in its strategic growth journey and propels the institution to the next level in the Nigerian banking sector. The deal represents a unique opportunity to combine Union Bank’s longstanding and leading banking franchise with TTB’s innovation-led model which promises to enhance the product and service offering for our combined valued customers.”
Chief Executive Officer, Union Bank, Mr. Emeka Okonkwo said:
“This transaction marks a significant milestone in the journey of our 104-year old Bank. Whilst thanking our current investors for their unwavering commitment to the Bank over the years, we welcome our new core investor, TTB. We recognize the strategic fit between the two institutions and expect that this deal will deliver the best outcome for our employees, customers and stakeholders. We look forward to collectively writing the next exciting chapter for Union Bank.”
Chief Executive Officer, Titan Trust Bank, Mr. Mudassir Amray said:
“After completing over two years of operations with aggressive organic growth, we are excited to have an opportunity for a significant leap forward in market share. UBN’s widespread presence, state of the art technology platform, quality staff and strong brand loyalty fits well with our synchronized modular strategy. We look forward to delivering superior results for the benefit of our staff, customers, shareholders, and stakeholders.”
Union Bank results
Union Bank reported a pre-tax profit of N17.6 billion in the first 9 months of 2021 up from N16.2 billion same period in 2020. The bank posted a return on average equity of just 6% in the same period and 7.2% in 2020. Its best return of average equity was 10% achieved in 2019.