NextMoneyBusinessReview: Season of Mergers

By Alex Ekemenah, Editor, NextMoney


Season of Mergers

About two years ago, there were speculations that some of the banks in the country may be weak or sick and that it is just a question of time before the bubble will burst for these alleged weak or sick banks. Accusing fingers were pointed here and there but nobody really dared to point to a particular bank. 2018 came to reveal the soft underbellies of some of these banks to the chagrin of the customers and the general public. Everybody is now highly suspicious of which banks might be involved without saying so loudly.

For instance, within a week in late September 2018, Skye Bank Nigeria Plc suddenly disappeared from the financial landscape of Nigeria after the Central Bank of Nigeria (alongside NDIC) intervened to inject whooping sum of N800 billion into the bank and changed its name from Skye Bank to Polaris Bank Nigeria Plc. The Governor of Central Bank of Nigeria, Mr. Godwin Emefiele explained that it took the action to change the name of Skye Bank to Polaris Bank to avoid being forced to liquidate it after its non performing loan stocks grew from N370 to N800 which the CBN invested back into the bank. “It must be seen to be owned by the CBN until we find investors that can pay a fair price for the bank.” That was how the bank lost its brand name that has been so familiar in the financial landscape in the country for over a decade. The former chairman of the bank, Mr. Tunde Ayeni is now in EFCC net, in preparation for arraignment in court for fraud and abuse of office.

The controversy surrounding this development has not completely disappeared from the media when the news broke again that Keystone Bank hitherto under the receivership of the Asset Management Corporation of Nigeria (AMCON) was alleged to have been sold to a new owner for “chicken change” or pittance without following due process.

Then came the mother of it all. Diamond Bank Nigeria Plc that was highly rated for its perceived stability suddenly caught a flu becoming sick enough to fall by the wayside of its Lekki Expressway headquarters but for the prompt intervention of Access Bank Nigeria Plc that came to take it over in merger or acquisition or both. It was an emergency situation calling for prompt action lest the patient should die miserably. An ambulance was rushed to the scene of the “accident” and the patient was ferried away for treatment. The theatre was the Boardroom of Access Bank headquarters at Danmole Street, Victoria Island.

As at the time of writing, the patient was still receiving treatment. A surgical maxillofacial operation is being carried out that will completely changed the identity of the patient which will make it no longer recognizable in the nearest future. It can only be remembered in memory, in history textbook henceforth!

There are few preliminary questions that have come to bother the minds of analysts and observers of the unfolding scenario especially regarding what has been regarded as the lukewarm attitude of the Central Bank of Nigeria as the scenario unfolded.

Why did Central Bank of Nigeria not intervene in Diamond Bank as it did in the case of Skye Bank to save it after seeing it heading down the drain, to suicidal self-liquidation? Did CBN not see Diamond Bank as bottoming out with its balance sheet going banana? Could the reason for non-intervention have anything to do with the fact that Diamond Bank was one of those banks sanctioned by CBN earlier in the year over the MTN saga? In that case, could it not be justified that to say that CBN was being unjust or “politically” vindictive in allowing Diamond Bank to suffer possible collapse if Access Bank has not come on to the stage to acquire it? Why the visible preferential treatment?

CBN acted as if it did not see any management and liquidity problem with Diamond Bank. It is suspected that CBN did not want to be seen bailing out another failed or failing bank so soon after it was heavily criticized for using tax-payers’ money to bail out Skye Bank. If CBN is sincere about its claim that it does not want to see any bank failing or heading for liquidation, it could have extended the same treatment to Diamond Bank by intervening decisively by injecting fresh capital into Diamond Bank but have its Boards of Director and Management dissolved. The sacking of the BoD and Management Board is the medicine for gross mismanagement of banks’ resources. Sanusi Lamido Sanusi, the immediate former Governor of Central Bank of Nigeria did not hesitate to wield the big stick on several poor performing banks then. He never apologized for his action which was deemed cruel or vindictive by the public till date. 

But why this period may be called a season of mergers is that it did not happen only within the banking sector. It extended its tentacles to the industrial sector where we had two cement manufacturers (Cement Company of Northern Nigeria Limited and Kalambaina Cement Company owned by BUA Group) came together to become one. The merger is expected to create a synergy powerful enough to challenge the virtual monopoly proverbially enjoyed by Dangote Cement in the country. In this merger, the BUA Group-owned Kalambaina Cement Company is the senior partner.

This merger and/or acquisition are taking place amidst low-intensity economic crisis in the country as 2018 came to a close. This is a key point to note in this case study. But what does this portend for the entire economy or the economic sector concerned?

There is no doubt that a new dynamic, mainly caused or driven by merger and acquisition, is being introduced into the economic landscape of the country.  Of course, Nigeria is not new to this economic phenomenon especially in the banking sector if we are to go by the number of banks that went through merger and acquisition process in the mid-2000s mid-wife by Central Bank of Nigeria under the Governorship of Professor Chukwuma Soludo. Thus, Nigeria and the key players concerned have a lot of lessons to learn.

This essay set out to challenge the fundamental assumptions underlining the current merger between Diamond Bank and Access Bank in a critical interrogation and analysis to lay bare the facile reasons peddled about in the media.

Entered the Octopus

What started as whispering, rumour including allegations and counter-allegations of wrongdoings especially on the part of the Management of Diamond Bank Nigeria Plc (notably its Managing Director, Mr. Uzoma Dozie) in the social media finally crystallized and culminated in an unprecedented acquisition of the bank by no other than Access Bank Nigeria Plc, one of the top-notch banks in the country.

Thus, the closing of the year 2018 made Access Bank Nigeria Plc to become the largest company in Nigeria in terms of assets.

How did this happen?

Indeed, in a swift and sharp move, like the bullet train (magnetic levitation train that serves as its symbol) Access Bank in a lightning manner, scooped up Diamond Bank Nigeria Plc in an acquisition that shook the Nigerian financial and banking firmament to its very foundation, to its core. Nothing like this has happened since the mid-2000s when mergers and acquisitions in the banking industry ruled the wave.

It was not a merger as such but what can be conveniently described as outright acquisition, even though in the many artistic impressions and pictorial images published in the media, a kind of sustainable idea was created that it was a merger – whereas the contrary is the case going by the final letters of the agreement between the two parties. In this essay, the terms merger and acquisition are used interchangeably.

The merger essence was largely missing from the media narratives though it was frequently used ostensibly to throw sands into the eyes of the unwary analysts and the gullible public. Diamond Bank was bottoming out at a fast rate that could have ended the whole pretence within the next six months had it not been for the proactive intervention of Access Bank. Access Bank, with its vulture eyes, saw a dying patient and move fast enough to came to its “rescue” from public shame or opprobrium that would have eventually befallen it. Access Bank carried Diamond Bank away to its own headquarters where it put on the slaughter table, butchered it and removed all its entrails!

In an increasing complex financial environment, and an era of fierce competition for strategic positioning, the acquisition of Diamond Bank by Access Bank serves a new template for strategic leadership in the financial landscape in Nigeria and indeed in sub-Sahara Africa. The banking ecosystem is today highly competitive. Competition is not only the name of the game but a matter of “eat or be eaten”. While the ecosystem may work for the benefit of the whole, an individual careless enough may be gobbled up for lack of personal discipline, competence, focus on the strategic goal as evidentially demonstrated in this case study of Diamond Bank.

With combined 42 million customers’ base, Access Bank has now emerged as Nigeria and Africa’s largest retail bank with a significant position in digital. This dwarfed every other leading contender in this category. With the acquisition of Diamond Bank, Access Bank has risen to the top of the ladder as the largest company in Nigeria, conveniently displacing Zenith Bank Nigeria Plc and FirstBank Nigeria Holdings respectively.

It was an audacious move, where angels would tread carefully, in a highly competitive environment both national and global. It was an end-of-the-year gift from Access Bank.

In our October edition, NextMoney, the institutional home for strategic thinking, fact-based analysis, and diverse perspectives profiled and rated the Nigeria’s 50 most profitable and largest companies. In that rating under the most profitable companies, Access Bank emerged number 6 with a profit base of N61.99bn while it emerged number 3 under the largest companies with an asset base of N4, 069.47bn. Under that rating too, Diamond Bank did not enter the list of the most profitable companies in Nigeria. But it emerged as number 6 under the category of largest companies in Nigeria with an asset base of N1, 714.81bn. 

Let us fast-forward and leave behind the sordid background chain of events that eventually culminated in the take-over of Diamond Bank by Access Bank.

In a statement regarding scheme or intention to merge with Access Bank, it was stated that “The Board of Diamond Bank Plc (“Diamond Bank”) today announces that following a strategic review leading to a competitive process, the Board has selected Access Bank Plc as the preferred bidder with respect to a potential merger of the two banks that will create Nigeria and Africa’s largest retail bank by customers.

The Board of Diamond Bank believes that the merger is in the best interest of all stakeholders including, employees, customers, depositors and shareholders and has agreed to recommend the offer to Diamond Bank’s shareholders. This is to say that Diamond Bank was at the verge of complete collapse. Diamond Bank openly welcome and embraced the option of merger or acquisition with Access Bank to avoid being either taken to the morgue or being taken over by the “bad guy” called Asset Management Corporation of Nigeria (AMCON) and finally having its entire reputation damaged or pulverized beyond repair. The merger with Access Bank provided an easy route of avoiding a complete shame of having its entire assets being taken over by AMCON. It was a saving grace from public opprobrium.  

The merger would involve Access Bank acquiring the entire issued share capital of Diamond Bank in exchange for a combination of cash and shares in Access Bank via a Scheme of Merger. Based on the agreement reached by the Boards of the two financial institutions, Diamond Bank shareholders will receive a consideration of N3.13 per share, comprising of N1.00 per share in cash and the allotment of 2 New Access Bank ordinary shares for every 7 Diamond Bank ordinary shares held as at the Implementation Date. The offer represents a premium of 260% to the closing market price of N0.87 per share of Diamond Bank on the Nigerian Stock Exchange (“NSE”) as of December 13, 2018, the date of the final binding offer.

Immediately following completion of the merger, Diamond Bank would be absorbed into Access Bank and it will cease to exist under Nigerian law. The current listing of Diamond Bank’s shares on the NSE and the listing of Diamond Bank’s global depositary receipts on the London Stock Exchange will be canceled, upon the merger becoming effective.

Diamond Bank expects the transaction to complete in the first half of 2019.

Uzoma Dozie, the Chief Executive Officer of Diamond Bank, said: “The proposed combination with Access Bank will create one of Africa’s leading financial institutions.  There is a clear strategic rationale for the proposed merger and strong complementarities between the two institutions. While Diamond Bank has pioneered Nigeria’s largest technology-led retail banking platform, Access Bank is one of Nigeria’s leading full-service commercial banks. Consolidation in the Nigerian banking industry is an inevitable, natural progression in a sector where the gap between Tier 1 and Tier 2 banks has been widening and scale has become critical; where technology will disrupt the traditional business model while enabling broader financial inclusion. 

The board of Diamond Bank believes that the proposed combination of the two operations provides an exciting prospect for all stakeholders in both businesses and will create a financial institution with the scale, strength, and expertise to capitalise on the significant opportunities in Nigeria and sub-Saharan Africa more broadly.”

Herbert Wigwe, CEO of Access Bank, said: “Access Bank has a strong track record of acquisition and integration and has a clear growth strategy. Access Bank and Diamond Bank have complementary operations and similar values, and a merger with Diamond Bank, with its leadership in digital and mobile-led retail banking, could accelerate our strategy as a significant corporate and retail bank in Nigeria and a Pan-African financial services champion. Access Bank has a strong financial profile with attractive returns and a robust capital position with 20.1% CAR as at 30 September 2018. We believe that this platform, together with the two banks’ shared focus on innovation, financial inclusion, and sustainability, can bring benefits to Access Bank and Diamond Bank customers, staff and shareholders.”

That sounded the death-knell of Diamond Bank, the denouement of all the allegations and counter-allegations of shenaniganism that unfortunately became the burden of leadership of the bank at a critical stage of its existence.

Crucial Take-Away

The take-over of the Diamond Bank by Access Bank in this epochal merger or acquisition is not without its immediate implications. The merger, even though not yet completed as at the time of publishing this essay, would produce Nigeria and Africa’s largest retail bank by customers. This would inevitably lead to a new form of rivalry or competition within the top-ranking banks in country and even in sub-Sahara Africa. It would upscale the profile of Access Bank also at international level.

The merger did not produce any known synergy. Rather, what it did was to further strengthen the position of Access Bank and making it to become the largest retail bank in Nigeria and Africa. Access Bank has become energized on a higher scale of operation with a wide customer base, assets and technology to drive its payment system, etc. This is expected to produce higher returns to its bottom line, most important of all, its capital adequacy ratio, etc.

What killed the Dinosaur?

Diamond Bank was a dinosaur, right from the very beginning – courtesy of the enormous efforts and sacrifices made by its chief founder, Mr. Paschal Dozie, a highly respected business guru in Nigeria.

Diamond Bank was incorporated on December 20, 1990. Diamond Bank Plc began as a private limited liability company on March 21, 1991. Ten years later, in February 2001, it became a universal bank. In January 2005, following a highly successful Private Placement share offer which substantially raised the Bank’s equity base, Diamond Bank became a public limited company.

Exactly twenty eight years later, Diamond Bank drove itself to the guillotine had Access Bank not come to its rescue.

Diamond Bank did not merge with any other bank, nor did it acquire any other bank during the merger and acquisition era of Professor Chukwuma Soludo-led Central Bank of Nigeria in the mid-2000s. Diamond Bank stood alone to the admiration of many. Diamond Bank was able to meet the N25 billion capital base requirement as stipulated by CBN at that time. Thus it was able to weather the immediate post-consolidation storm that left many banks in the country gasping for fresh air, and a storm that swept many of them from the financial landscape and scene of contemporary economic history of Nigeria. In fact, the headwinds of the global financial crisis of 2007/2008 did not affect it tangibly.

So how did this dinosaur suddenly got diseased within a short space of few years and suffer a disgraceful and miserable death? Media coverage of the event largely ignored, in what can be considered as cowardice or pusillanimity, the major issues that led to the take-over of Diamond Bank by Access Bank for critical interrogation and analysis. The kind of media reportage of the take-over is a clear case of white-washing, papering over the sins and infamies allegedly committed at Diamond Bank’s end of the pole. This is not surprising either because of the philosopheme that journalism is history in a hurry, thus hastening over critical issues or because it has not been able to extricate itself from the bondage of stovepipe systems in which media in Nigeria has been allegedly imprisoned as argued in some quarters.

The fact is that there can be no effect without cause, no reaction without action – leading interrogators and analysts to ask: what was the crux of the incident?

The bottoming out of Diamond Bank might not be unconnected with its humongous debt stock (non-performing loans) that has gone toxic over the past years. It got increasingly unmanageable every passing year. Loans (gross) reached N57 billion in September 2018 while deposits grew to N806 billion at the same time. Loans grew quarter-on-quarter as more funding was channeled to retail segment, where we continue to see opportunities. We expect improvements in quarters ahead. Deposits increased year-on-year, and quarter-on-quarter as unique product and service offerings gain traction.In business banking the loans reached N91 billion in September 2018 while deposit at the same time reached N127 billion. According to its nine-month financial report, the bank claimed that its loan volume increased due to increased risk asset growth within the sector, while deposits decline  recorded due to maturities and non-rollover of high deposits, in-line with earlier guidance. In corporate banking the loan suite bulged to reach the size of N636 billion in September while deposit shrank to N154 billion at the same time. The decline in loan book was attributed to pay downs and recoveries. Decline recorded due to maturities and non-rollover of high priced deposits.

The bank admitted that gross revenue was flat during the period, while operating expense increased 2.9% year-on-year. Non-performing loans reached 12.6% at the peak of N71 billion as at March 2018 and declined to N54 billion in September 2018. It also admitted that net interest income declined quarter on quarter after higher interest expense in first two quarters with declining deposit volumes

According to Proshare, “the bank’s capital adequacy ratio (CAR) currently prints at 16.3% and it’s slightly above the regulatory requirement of 15%. Earlier in 2016, the bank almost saw its CAR fall below the minimum regulatory requirement, printing at 15.01%. This however increased to 16.74% by FY 17 largely on the back of divestment from its West African business which saw the removal of deduction on investment and lending to subsidiaries2. Supporting the increase in its CAR was also a decline in Risk Weighted Asset (RWA), albeit, growth in core regulatory capital was however flat. 

“Although improving, asset quality issues still persist with the bank’s NPL ratio standing at 12.6% as at 9M 2018 (FY 17: 14.7%). The bank has a large exposure to the power sector and oil & gas, both of which accounts for 57% (FY 17: 73%) of total NPL and 61%3 of loan book.” (October 29, 2018)

These NPLs have historical origin, according to inside sources, traceable to the era of Alex Otti-led Management Board which some of his supporters vigorously denied publicly. But it could have been easy to find out the truth if CBN had stepped into the matter to audit its books and make a public disclosure of this. Diamond Bank is not the only bank with such humongous NPL stocks that have gone toxic often cleverly hidden under the term “amortization” or “impairment” in the financial books. Was Diamond Bank the only bank that has the highest toxic NPL stock? Comparative analyses of other banks’ financial books will reveal the pattern of NPL across the broad spectrum of the banking sector. This suggests that the management of the NPL portfolio is the real issue and not the portfolio itself. What was the risk management approach to this NPL stockpiling in the accounts of Diamond Bank?

However, all these are now history. But Access Bank insisted that Diamond Bank clean up (write-off) its entire non-performing loans before the merger can be concluded. That was the precondition given so as to avoid a situation where Access Bank will assume the liability for these non-performing loans that have gone toxic. By implication, the picturesque presented to us is that of a silo mental approach to the burgeoning NPL portfolio from which we can extract the value lost in the process.

Critics charged, as can be extrapolated from social media (including traditional media), that the dinosaur contracted a cancer of the prostate (some even called it elephantiasis of the scrotum) when the last Managing Director (Uzoma Dozie) was appointed to steer the affairs of Diamond Bank. Critics charged that it was a grave and costly error of judgment on the part of the patriarch, Paschal Dozie, to get his son appointed as the Managing Director. Even though, Uzoma Dozie has the necessary academic qualifications to hold such a high but sensitive post, critics charged that he conspicuously lack the cognitive ability to handle such a vast complex entity like Diamond Bank. In fact, unfortunate as this may sound, Uzoma Dozie is described as a spoilt brat, a modern Prodigal Son who had come to squander his father’s legacy.

According to a branch manager who spoke to this writer in absolute confidence, it was a sad turn of events for Diamond Bank, but thanked God that a total calamity has been averted by the merger. He said he has not forgiven Uzoma Dozie for his negative composite behavior and management style that drove Diamond Bank into the womb of Access Bank. “Bulshit! In a merger, there is always a senior partner and a junior partner. This is not a case of equals at all. In this case, Access Bank is the senior prefect while Diamond Bank is the junior boy. Thank God that we are being taken over by Access Bank. But Uzoma Dozie did not retire or resign as the bank’s managing director. Rather, he is being shoved aside and out even if he is allotted some shares in Access Bank. He will never be a bank’s managing director again. He can go and become the managing director of his village “esusu” fund and do whatever he likes with it. He is not a serious person at all!”

But this can only be one part or aspect of the story. The other part, largely ignored by the critics, is the role of the entire Board in the whole sordid affair. We need to extend the tentacles of interrogation and lens of analysis to that of the Board of Director and also that of the Management Board. Both bodies cannot be absolved of the blame for the failure of Diamond Bank. The Boards cannot claim ignorance of what critics charged the Managing Director was doing to jeopardize the future of the bank. There must have been a registered pattern, a handwriting on the wall of which its negativity must have been visible for all to see. The failure to activate the mechanisms of checks and balances within the top hierarchy of decision-making process is solely that of the Boards and a fundamental indictment for its gross dereliction of duty. 

However, fundamental questions need to be asked as to how the Managing Director was able to get away with all his alleged sins or infamies. Objectively speaking, it is an unwholesome and unsavoury situation where what has been described as personal peccadilloes of the chief driver were allowed to crash the vehicle or derail the train. Diamond Bank presents an analogous scenario where the driver of the vehicle was allowed to get drunk and still remain behind the steering wheel! The first question was: what is the strength of the mechanism of checks and balances at the different layers of decision-making process? It is only by answering this question satisfactorily that we can meet the intellectual condition of objectivity in our analysis of the crisis that has now led to the demise of Diamond Bank.

This leads us to the second question: to what extent can we hold both the Boards responsible for the calamity that now befallen Diamond Bank? The “Law” is often said to be an ass but it is never considered emotional. Rather it is a cold-blooded instrument by which variables (known and unknown) and conditional imperatives are weighed on scale of balance  or justice. There is no doubt that both Boards are culpable in the whole chain of events that led to this calamity, from moral standpoint. That of course include the individual role, especially that of the Managing Director. But both the Boards must also be held responsible for all the unpopular actions or inactions committed by the Managing Director. We might not speak of collusion in the criminal sense of it, but we can justifiably speak of moral blameworthiness for the mess that Diamond Bank found itself. Both Boards could not summon the necessary courage or strength to call the Managing Director to order. Thus in the weakness of the Boards, the Managing Director was allowed, willy-nilly to travel down the road from which there was no return. It was a downward slope that led to the abyss of take-over by another powerful player in the industry: Access Bank Nigeria Plc.

The Boards have the onerous responsibilities of checking the excesses or infarctions of any member of the Boards. In the extreme case, such a member can be yanked off the membership of either of the Boards. This did not happen in the case study of Diamond Bank thus making critics to charge that the moral blameworthiness or even criminal liability (where this can be proven) should lie squarely on the shoulders of the Boards. In this regard, to call for the resignation of the Managing Director, for instance, would not have been out of order in the circumstantial context of what cumulatively happened within the bank to its own detriment.

The Banker magazine once called for the resignation of the US Secretary of Treasury, Paul O’Neil. “In a highly uncertain world, leadership is critical. In a financial world where one economy, the US, is dominant, financial leadership of that economy is of paramount importance. US Treasury Secretary Paul O’Neil has the power to move markets, direct policy and create stability, not just in the US but around the world. Unfortunately, he has not done that, in a positive way at least. Of course, he alone is not responsible for the economic ills troubling the US and the rest of the world, but his lack of sensitivities and global vision do not seem part of any viable solution either. For the world’s sake, it is time for him to go (The Banker, London, October 2002, p. 1)

There were allegations and counter-allegations extending back to the era of Alex Otti-led Management Board. Most of the allegations and counter-allegations did not offer nice reading at all. There were very personal matters involved which may be justifiably factored into the analysis of what went wrong with Diamond Bank. But the fundamental issues are hardly discussed. These issues involved the various management strategies adopted that did not work at each critical stage of the evolution of the crisis over the arch of time and space

In short, what was witnessed in this case study is that of a massive failure of leadership irrespective of whether we want to heap the blame for this failure on the Managing Director alone or not.

Why Merger and Acquistion?

Mergers and acquisitions (M&A) are defined as consolidation of companies. Differentiating the two terms, Merger is the combination of two companies to form one, while acquisition is one company taken over by the other. M&A is one of the major aspects of corporate finance world. The reasoning behind M&A generally given is that two separate companies together create more value compared to being on an individual stand. With the objective of wealth maximization, companies keep evaluating different opportunities through the route of merger or acquisition.

Mergers and acquisitions can take place by purchasing assets; by purchasing common shares; by exchange of shares for assets and; by exchanging shares for shares

Merger or amalgamation may take two forms: merger through absorption or merger through consolidation. Mergers can also be classified into three types from an economic perspective depending on the business combinations, whether in the same industry or not, into horizontal (two firms are in the same industry), vertical (at different production stages or value chain) and conglomerate (unrelated industries). From a legal perspective, there are different types of mergers like short form merger, statutory merger, subsidiary merger and merger of equals.

There are several reasons for mergers and acquisitions. They may or may not include the following: financial synergy for lower cost of capital; improving company’s performance and accelerate growth; economies of scale; diversification for higher growth products or markets; to increase market share and positioning giving broader market access; strategic realignment and technological change; tax considerations; undervalued target; and diversification of risk

But there is always synergy value created by the joining or merger of two companies. This is because the driving principle is that 2+2 is never 4 but 5! The synergy value can be seen either through the Revenues (higher revenues), Expenses (lowering of expenses) or the cost of capital (lowering of overall cost of capital).

The merger between the two banks took place to save Diamond Bank from ignoble disgrace of complete collapse and filing for bankruptcy with the attendant consequences of customers losing their savings, shareholders losing their investment, complete job losses, etc. It is also meant to shield the top managers of Diamond Bank from criminal prosecution.

Diamond Bank recorded its worst month on record in November (2018) with its share plunging to 0.65k per unit at the capital market. With this situation, if Access Bank had not come to the rescue, it lies within the realm of possibility that Diamond Bank could have completely lost its share value within the next few months. The end-result would have been a complete collapse and bankruptcy.

The deal involved acquiring the entire issued share capital of Diamond Bank in exchange for a combination of cash and shares in Access Bank via a Scheme of Merger. Access Bank said based on the agreement reached by the boards of the two financial institutions, Diamond Bank shareholders will receive N3.13 per share, comprising:

  • A cash consolidation of N1.00 (Naira) per Diamond Bank share representing a total cash amount of N23.16 billion ($75. 58 million) and;
  • The allotment of 6.61 billion new Access Bank ordinary shares, representing the 2 new Access Bank ordinary shares for every 7 Diamond Bank shares.

The offer represents a premium of 260% to the closing market price of N0.87 per share of Diamond Bank on the Nigerian Stock Exchange as at December 13, 2018, the date of the final binding offer. Analysis of the figures shows that the buyout comprises of 6.62 billion for a share price of N0.87 each is worth $15.8 million.

In summary, Access Bank pumped out more than $90 million for the final acquisition of Diamond Bank.

Uzoma Dozie was quoted in the press as confirming that “With this approval, the bank will cease to operate as an international bank.

 “The re-licensing as a national bank supports Diamond Bank’s objective of streamlining its operations to focus resources on the significant opportunities in the Nigerian retail banking market, and the economy as a whole.

“The move follows Diamond Bank’s decision to sell its international operations, which included the disposal of its West African Subsidiary in 2017 and Diamond Bank UK, the sale of which is currently in its final stages.

“The change to national bank status also enables the bank to maintain a lower minimum capital requirement of 10 per cent, as against 15 per cent required for international banks.”

Later, the music changed its tune. Initially, both banks denied the merger and acquisition. However, they later came to confirm it and what Uzoma Dozie was quoted as saying in a press release sealed the fate of Diamond Bank. He said the bank’s shares would be absorbed into Access Bank and at the completion of the merger exercise Diamond Bank would cease to exist under Nigerian law. “The current listing of Diamond Bank’s shares on the NSE and the listing of Diamond Bank’s global depositary receipts on the London Stock Exchange will be cancelled, upon the merger becoming effective”.

It was a tragic turn of event for a bank that was a product of physical labour of one man and those trusted collaborators and aides.


One thing is very clear and this must be stated without fear or favour, without let or hindrance: the demise of Diamond Bank was not a product of a competitive environment but a direct of product of internal rottenness caused by mismanagement of the resources of the bank. The bank thus can be said to have lost its competitive edge and comparative advantages. It is a tragic story of how not to run a bank in 21st century. But whatever the case, this study demonstrates the abysmal failure of a business model, of strategy, innovation and destruction of self-esteem under the leadership of the Board of Directors and Management Board that are never called to account for what really happened. The failure is conveniently papered over and swept under the carpet.

Thus, in all objectivity, the blame for the failure cannot be put exclusively on the head of the Managing Director alone. That would be subjective and injurious to the personality of the Managing Director. A holistic approach to the incident definitely rules out such a subjective tendency. We have to extend our analysis to the role of the Boards in an era of crisis that engulfed Diamond Bank which calls for reexamination of the governance principles of the decision-making process within the Boards.

“It’s important for a company to have leaders who articulate the core strategy, act as guardians of the flagship offerings, and remain vigilant in serving valued customers. But if you are acting as an innovation leader, that is not your job. You must be an advocate for the new and the different, setting the grand challenge more by deed than by word – by keeping an eye out for the unusual (the outliers, the frustrated customers, the anomalies), fearlessly questioning the assumptions on which the core business runs, and demonstrating the willingness to try things that may be far outside the norm. Even (or especially) if they don’t work, that will send the message that you are serious about innovation” – Nathan Furr and Jeffrey Dyer: “Leading Your Team into the Unknown”, Harvard Business Review, December 2014, p. 83.

Leadership is managing market change, and a bank leader must be market-savvy. Unfortunately the picturesque presented to us by the leadership of Diamond Bank is that of an unfocussed, poor relationship-oriented, lack of commitment to strong product and service delivery. There are no evidences of values placed on customers’ and shareholders’ interests, boosting of staff morale, strong risk management culture, cultivation of teamwork, premium place on professionalism and integrity. If all these were available, the bank would not have ended in the belly of Access Bank in the first place the way it did. The risk of bluntly saying is very high given the reactionary temperament of bank officialdom. But no offence is meant to any individual concerned. It is a risk that must be taken where other media practitioners have failed woefully. This is because inexorably it is Boards that have to take the final blame. And in most cases, when the push comes to a shove, the Board can be swept off in the tidal wave of change.

Are there other banks that are suffering the same malady as Diamond Bank? What would be their fate in the coming years?

The emergence of Access Bank as the largest retail bank in Africa will inexorably set a new tone of competition at the apex of the banking industry in Nigeria in the coming years. Access Bank has beaten all other banks to this game of merger and acquisition and emerged unscathed, bigger and stronger that make the heads of other banks swoon with envy. The event has set a new wave of competition in the financial market, introducing new calculus, equations and dynamics that should not escape the attention of the Boardrooms of other banks and financial enclaves.