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Failed merger: Why we couldn’t accommodate Gulf and UTB – FCB

Posted by By CHIDI NNADI and OMODELE ADIGUN on 2005/05/24 | Views: 1073 |

Failed merger: Why we couldn’t accommodate Gulf and UTB – FCB


Fresh facts have emerged on why Union Bank Plc acquired Gulf Bank and Universal Trust Bank (UTB) who were originally in merger talks with Hallmark Bank, Allstates Trust Bank and Lion Bank in the First Consolidated Bank in Nigeria (FCB) group.

Fresh facts have emerged on why Union Bank Plc acquired Gulf Bank and Universal Trust Bank (UTB) who were originally in merger talks with Hallmark Bank, Allstates Trust Bank and Lion Bank in the First Consolidated Bank in Nigeria (FCB) group.

Daily Sun investigations revealed that Gulf Bank and UTB had liabilities that were considered a heavy burden by FCB, making the first group, which signed Memorandum of Understanding (MOU) in September last year to be sluggish in moving forward.

Authoritative FCB sources told Daily Sun that soon after the five banks signed the MOU in September, they constituted a five-member Due Diligence team to look into the books of the five merging banks, who discovered that Gulf Bank and UTB had serious issues that would set them back, but the duo have fired back to say their future was not secure in the FCB group.

But the sources alleged that the Due Diligence team discovered that Gulf Bank was indebted to Union Bank to the tune of over N42 million and had granted some of its executives a N120 million mortgage loan to be repaid in over 20 years just as the bank had been thrown out of clearing in December, which made withdrawal by depositors and payment of salaries to its staff difficult.
Consequently, Gulf Bank, the sources said, could not meet its financial obligations to the FCB group, even when the group had set a target of raising their shareholders’ fund to N50 billion.
Also the FCB sources hinted that UTB had operational issues that were weighing it down, leading to a mass purge in the bank and the NDIC and CBN coming to comb through its books.
One of the sources told Daily Sun, that at a stage the CBN came into the bank (UTB) to stay for about four months, doing a thorough verification of the bank’s books, which was quite different from the routine CBN’s pre-AGM checks.

The sources, therefore said that the exit of Gulf and UTB was at the instance of the CBN, which felt they would be better acquired by Union Bank where it is believed they still have some issues to settle after the CBN wrote off 80 per cent debt of eight banks which they are believed to be among.
The six other banks forgiven by the CBN include:

Bank of the North – N41 billion, Societe Generale Bank of Nigeria – N14 billion, AIB International Bank – N10 billion, City Express Bank , Afex Bank and Fortune Bank.
The crack in FCB came to the open on April 13 during the group’s meeting at Allstates Trust Bank, Victoria Island, head office when Gulf Bank was conspicuously absent, making them to note that it (Gulf) had left to “pursue another option.”
But another shocker came to the group a day later when UTB whose chairman and new managing director who were at the meeting the previous day came to announce its withdrawal and decision to join Union Bank.

FCB, Daily Sun gathered became more relieved with the exit of the two banks, whose problems had made the group to shift the date for signing its definitive agreement thrice.
The group also said that the exit of the two banks would not affect its resolve to push up its capital base to N50 billion, disclosing that they have set August as the new date to meet this dream as Hallmark Bank, which currently has about N8.4 billion is ready to hit N15 billion while AllStates with about N4 billion will soon come to the capital market to raise its capital to N20 billion and Lion to target N10 billion from its present N3 billion.
When contacted, Gulf Bank through its spokesman, Mr Kayode Oluwa, said they had anticipated that FCB would “resort to cheap blackmail” as they have left the group, explaining that they left when they noticed that “FCB does not understand consolidation.”

“We discovered that they were just playing dirty games and were no longer relevant in the move to meeting the N25 billion prescribed by the Central Bank. We discovered that all of us put together could not meet the N25 billion. We were having the highest shareholders’ fund in the group with N6 billion,” he disclosed, adding that “FCB was weak from the foundation.”
Oluwa told Daily Sun that they needed to pull out to join a stronger group to enable the bank pursue its new vision under its new managing director, Pastor Mike Okueyungbo.
He, however, agreed that Gulf had liquidity problems in December that made it to be thrown out of clearing, saying they are now back.

Oluwa argued that other banks, even the big ones, do have liquidity problems at times, saying that liquidity problem does not mean that a bank is in distress.
In response to the allegation that Gulf gave N120 million mortgage loan to two of its executives, he queried, “Don’t they too have mortgage facility in their banks?” adding that a staff is entitled to mortgage facility in any of the banks and that of Gulf was not an exception.
Even though he denied that his bank owed staff salaries, he said it could be a measure adopted to tackle liquidity problems.

On the part of UTB, its head of Corporate Affairs, Mr Ndubusi Ifejika, told Daily Sun that they simply left FCB to enhance the interest of their shareholders.
Ifejika said they had stated this in a statement issued on April 19, to announce their merger with Union Bank, which read in part:

“The bank has explained that its plan to consolidate its operations with Union Bank was borne out of a sound and strategic business decision and in the best interest of all its shareholders. The consolidation of Universal Trust Bank Plc with Union Bank makes tremendous sense strategically, operationally and financially.”

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Fay(Katy, Texas, US)says...

Actually translates to bravehearted.