MINORITY shareholders in pan African banking group, African Banking Corporation Holdings (ABCH), are unlikely to accept a mandatory offer by majority shareholders after it emerged this week that the current valuation of BancABC was too low and would likely prejudice minorities.
Sources close to the developments said the ABCH board of directors was unlikely to recommend minorities to accept the offer as the right offer share price could result in loss of value for the affected shareholders.
Sources told businessdigest this week that under the original waiver granted by the Botswana Stock Exchange (BSE) last year, African Development Corporation (ADC) was bound to reduce its shareholding or make a mandatory offer “within a reasonable time”.
“Clearly, now they have to make the offer to satisfy and remain compliant with the BSE regulations,” the source said.
ADC, the major shareholders of the banking group, this week announced plans to buy out minority shareholders in ABCH at an issue price of US$0,60 per share and at the exchange rate equivalent of BWP5,05 on the BSE. This is the same price at which ADC increased its effective shareholding in ABCH to over 50% following the successful US$50 million rights issue, undertaken by the bank last year.
ABCH is currently trading at US$0,60 per share giving the banking group an overall market capitalisation of US$43 million as at May 29 2013. The banking group’s shares have traded at an all-time high of US$0,95 per share.
ADC has entered pooling agreements with two aligned minority investors of BancABC for a further 7 741 562 shares in the banking group. The underlying shares in the pooling agreements were purchased at a price below US$ 0,60 per share. Through these two pooling agreements, ADC is guaranteed to maintain control of BancABC with 50,1% majority despite the recent debt conversion by the International Finance Corporation.
Last year in July, BancABC floated a rights offer, which was fully subscribed. The offer saw major changes within the shareholder base which resulted in ADC taking a direct shareholding of 41,7% of ABCH’s total issued shares. ADC agreed to warehouse an additional 8,7% of shares as a financing mechanism for the executive management team. As a result its effective shareholding went to 50,4%.
To see through the rights offer, ABCH had secured a special dispensation granted by the Botswana Stock Exchange (BSE) which allowed ADC to increase its shareholding as a result of the underwriting deal.
ADC, which was already a significant shareholder of ABC Holdings with 23,4% stake, was granted the preliminary waiver of the requirement to make a mandatory offer to minority shareholders in the event that its shareholding increased to 35% or more as a result of the underwriting transaction.
In terms of the BSE listing requirements, if any person including an existing shareholder acquires 35% or more of the ordinary issued shares of a listed company, that person is obliged to make an offer to the rest of the other “minority” shareholders at the same price that they have accumulated the 35% stake.
However, ADC is now required to make an offer to all other shareholders of ABCH to acquire all the shares held by them at the rights offer price.
Dirk Harbecke, CEO of ADC said: “ADC’s vision is to strengthen its existing banking operations, expand into further attractive banking markets and to establish a pan-African banking group over the next 2–3 years.
The strengthened equity position and shareholder base of BancABC is an important step to secure further access to funding. By engaging in pooling agreements and executing the takeover offer, we aim to firm-up our control in BancABC and to realise our vision together with the strong BancABC management team.”