Monday, 12 March 2018

adb and unibank takeover fiasco: what sanctions await parties involved?

Image result for ADB AND UNIBANK
Adnan Adams Mohammed

Customers of Agricultural Development Bank and Unibank and the general public were shocked to read in the news last week, that uniBank had taken over adb through a majority shareholding.
It was a surprising news as well to the regulators of the industry, that is, Bank of Ghana and the capital market regulator, the Securities and Exchange Commission.
The regulators responded that, they were not aware of any application from any of the banks for any intended takeover which is a legal requirement for such takeovers to be recognized as legal or enforceable.
This led to a number of happenings and counter reactions from stakeholders. The Ghana Stock Exchange (GSE), suspended trading in ADB shares on the market for close to a day while awaiting clarifications from concerned parties over the issue.

However, GSE in a press statement issued to announce the lift of ban on trading of ADB shares, advised the investing public to go ahead and work with the bank.

“With reference to Press Releases numbered 068/2018 and 073/2018, the Exchange announces the lifting of the suspension of trading in the shares of ADB with immediate effect. The investing public and all stakeholders are to note the information released in the Press Release numbered 073/2018 and be advised accordingly.”

A statement from the GSE explained that the action was taken pursuant to section 7 of the GSE Automated Trading rules.

Subsequent to the lift of the ban, Unibank had issued a press statement to deny reports that it has taken over ADB, contrary to their own initial comments to the media about their purported “ strategic takeover of ADB.”

Earlier reports stated that Unibank had taken over ADB after four shareholders of ADB comprising Belstar Capital, Starmount Development company, EDC, as well as SIC Financial Services Limited, pledged their shares, proceeds, entitlement and voting rights to Unibank, giving it control over ADB.

But in a twist of events, a statement issued by Unibank, and signed by Dr. Kwabena Duffuor Jr, said “we are NOT taking over ADB”.
Also, a press release signed by the chairman of ADB debunked the publication, adding that a pledge by the shareholders does not give Unibank the power to take over the bank.

“It is the opinion of ADB that, a pledge does not have the effect of the transfer of ownership. Thus if the shareholders mentioned herein have pledged their shares together with any benefits or privileges attached thereto that will not have the effect of making Unibank a shareholder of the ADB or constitute a takeover of the Bank,”.

Meanwhile, SIC Financial Services Limited (SIC-FSL) has debunked the Unibank claim, saying it has not pledged its shares in ADB to Unibank in fulfillment of an earlier financial commitment.

This is contrary to earlier reports that suggested that the company, SIC FSL, is part of a consortium of shareholders of ADB who have pledged their shares to indigenous bank, Unibank.

However, information available indicates that the financial services company could not have been part of the deal after all.
Bank of Ghana says it has not approved a purported takeover of ADB by Unibank, likewise the SEC.
In an interview with the Director General of SEC, Rev Danie Ogbarmey Tetteh, he said, there can never be a takeover without an application by the  intended parties and the application will then be reviewed and either approved or disapproved.
But, in the ADB and Unibank case, we haven't received any application.

Also, Governor of the Bank of Ghana, Dr. Ernest Addison, said the central bank has not given any consent.

“So let me respond to some developing story this morning, the Bank of Ghana has not given approval to the purported takeover or through the pledging of shares to Unibank,” the Governor stated at the Ecobank head office commissioning event last week.
But, Investment Banker, Mahama Iddrisu has cited ADB’s quest to meet the new minimum capital requirement of GHC400 million as a possible reason for the pledge by some shareholders of ADB to Unibank.

“…Having done that, which means that the pledgee will not have certain rights to those shares because those have been pledged with the provider of a debt. If it is not a debt, it means that there is a general agreement between the pledgee and the pledgor to make sure that they have the needed consideration which in this case may not be money to be able to run the other institution,” he explained.

Mr. Iddrisu further clarified that the action taken by the shareholders and Unibank subsequently does not constitute a takeover.

On Wednesday, 7 Mar 2018, Unibank Executive Director, Clifford Mettle had said Unibank has acquired 51% of ADB's shares in a statement and published by several media houses.

Clifford Mettle, added that the bank’s acquisition of 51% shares in the ADB is a strategic alignment.

According to him, the services the two banks were already rendering to customers won’t change following the takeover.

“ADB will continue to focus on its agricultural development policies and we at Unibank will also continue to focus on our SME policies,” he told Chief Jerry Forson on Accra 100.5FM on Wednesday, March 7.

Confirming the purported takeover to the Accra based radio station, Mr Mettle said: “Unibank has a controlling right of ADB, we now control 51 percent share in ADB.”
He added : “For now as we speak we have the controlling right but nothing changes with the customers, all the services that they enjoyed with ADB, they will continue to enjoy those services, nothing has changed, this is a strategic alignment. “We at Unibank will continue to focus on our SME values and the ADB will continue with their agricultural focus policies.”

He however did not reveal plans for the staff of the ADB following the takeover.

“I don’t want to comment on staff issues for now but redundancy is not the only way of making a company to perform. There is a meeting which is going to be held tomorrow on this move and so let us wait for the outcome of the meeting.”
But it was surprising for the same bank, Unibank, to come back contradicting itself that it has not involved in any takeover of ADB.
On Thursday, 8 Mar 2018, Unibank in a press statement signed by  the Chief Executive Officer said, there was no arrangement for it to take over another indigenous bank, ADB despite reports to the contrary.
The statement read as follows: “On the back of the newspaper publication this morning concerning the purported takeover of ADB by Unibank, we wish to state emphatically that we are NOT taking over ADB.”

The statement noted, “We wish to provide clarification for the benefit of the investing public and our esteemed clients as follows: In November 2017, we reached an agreement with the Belstar led  consortium to sell their entire holding in ADB and, to subsequently invest the proceeds into Unibank.

“This led to an agreement between both parties with a set timeline for closure of the transaction which would culminate in Unibank raising a minimum of GH¢600 million in capital and with Belstar acquiring a stake in Unibank.

“Due to the delayed timeline of the equity investment, Unibank has taken the additional precaution of committing Belstar Capital to their obligation under the share subscription agreement by pledging all shares held by the Belstar led consortium in ADB to ensure that the transaction will be consummated and the proceeds from the sale of shares paid directly to Unibank.

“It is against this background that Belstar Capital Ltd and other members of the consortium of shareholders have pledged their shares in ADB to Unibank to demonstrate their commitment to the agreement and the strategic direction of Unibank.”

The bank further stated, “We wish to put on record that the pledge by members of the Belstar led consortium does not constitute a sale of shares to Unibank. It is only a demonstration of commitment by our capital raising partners and must be considered as such.

This makes the whole issue more confusing and somehow undermines the authorities of the regulators of the industry.
Some experts have raised questions like, so the regulators were never aware of the share pledges share made to Unibank by the other shareholders of ADB? And was it ethical for those entities or shareholders to have made such a pledge without informing the regulators or other major shareholders of ADB?
With the contradictory statement from Unibank, what will be the possible action against the CEO and the company, since it had significant effect on investment of other stock market players? Because for close to a day, ADB shares were suspended from trading.

Serious action needs to be taken against any faulting party in this fiasco to serve as deterrent to other industry players.