Observers React to Potential Zenith Bank, Union Bank Merger

By Dipo Olowookere

One information that is gradually gaining momentum in the nation’s stock market is the rumoured acquisition or merger between Zenith Bank Plc and Union Bank of Nigeria Plc.

Both financial institutions are listed on the Nigerian Stock Exchange (NSE) and it is expected that speculations as this will catch the attention of their respective shareholders.

On Saturday, it was rumoured that the Central Bank of Nigeria (CBN) has given Zenith Bank the go ahead to ‘swallow’ Union Bank, one of the oldest lenders in the country.

This came few days after it was reported by a national daily that First Bank, unarguably the oldest bank in Nigeria, was planning to absorb Heritage Bank and Polaris Bank, which used to be Skye Bank.

About 24 hours after this news was reported, FBN Holdings Plc, the parent company of First Bank Nigeria Limited, issued a statement admitting that it was shopping for a bank with value to acquire.

So, when the rumour about Zenith Bank looking to ‘take in’ Union Bank hit the investing community, observers were quick to share their views on the matter, especially when it was speculated that Zenith Bank beat Access Bank to the deal.

Access Bank has before now been linked with Union Bank on possible but both companies refuted that by releasing statements to the NSE.

Recall that it was about this time last year that Access Bank completed its merger with the defunct Diamond Bank then headed by Mr Uzoma Dozie.

That deal also started late 2018 as a rumour, with both banks initially denying the ‘marriage’ vehemently, until its former Chairman, Mr Seyi Bickersteth, hinted that the issue of selling the bank to Access Bank came up at one of its board meetings, but was rejected by a set of members, who were later schemed out of the transactions.

So, when the news of Zenith Bank planning to merger with Union Bank came out yesterday, Business Post reached out to some players in the capital market, including stockbrokers, shareholders of both companies involved, analysts, journalists and others to get their views.

A shareholder of Zenith Bank Plc, Mrs Modupe Adediran, who spoke with Business Post, described the rumoured acquisition of Union Bank as a good one, saying it would bring out more earnings and profits to the financial institution.

“It is a good development. In fact, it is long overdue and I am happy that the management of my company is looking at inorganic growth. You will agree with me that Zenith Bank is a classy bank and loves organic growth. Let’s see how this pans out,” she said.

However, a Lagos-based business journalist, Mr Audu Abubakar, warned that the merger between Zenith Bank and Union Bank could be brutal for shareholders of the former.

“I don’t know why Zenith Bank is going for Union Bank that has only managed to reward its shareholders this year for the first time in over 10 years.

“I just hope this deal will not turn out to hunt Zenith Bank and its shareholders, who have been enjoying steady dividend payment over the years.

“If you remember vividly, Access Bank could not give its shareholders a good dividend for the 2019 financial year largely because of its merger with Diamond Bank last year, which significantly increased its outstanding shares, resulting in the paltry 40 kobo dividend the board proposed to pay,” Mr Abubakar stated.

An investor in the stock market, Mr Emmanuel Ewumi, while giving Business Post his view on the matter, stated that, “I think this is the first acquisition by Zenith Bank. Zenith [Bank] is about the biggest bank in Nigeria based on profitability and asset.

“I think the acquisition of Union Bank, if true, will go a long way in consolidating the position of Zenith Bank in the industry. I want to believe that [the] management has done their homework and due diligence before opting for Union Bank.”

Concluding, Mr Elewunmi stated that the rumoured deal “will be a win-win situation for the shareholders of both Union Bank and Zenith Bank.”

On his part, Mr Oremade Oyedeji of the Radiant Shareholders Group, one of the registered shareholders groups at the capital market, informed us that, “I was surprised when I heard the rumour too. What will be the name of the new entity, Union Bank I suppose?

“I don’t see it a good marriage at all, whether as a merger or takeover. We are going to end up with an over-bloated overhead like Access Bank, with poor return on asset employed.

“I also think we need a legislation for anti-competition and monopoly law in Nigeria.”

A senior official of Veritas Registrars, who asked us not to mention his name because he was authorised to speak on the matter because his company is the registrar of Zenith Bank, informed Business Post that Zenith Bank is considering different options of achieving its growth plan. However, he did not specifically say if the rumour has any iota of truth in it or not.

“What I can tell you is that Zenith Bank seriously considering several options to expand its operations, including acquisition of distressed, but profitable ventures. I know in due time, the bank will officially state its position on the matter,” the source simply told Business Post.

Business Post recalls that in 2019, during an analysts’ call, which we also participated in, the Group Managing Director of Zenith Bank, Mr Ebenezer Onyeagwu, said the bank will not hesitate to acquire any available lender that falls in line with its (Zenith Bank) vision.

“In terms of acquisition, we will continue to grow organically, but if we find anything attractive in the market, that is in line with our strategic imperative, we will look at it.

“But we will not go out inordinately to seek for acquisition, but if we find something that is quite attractive and really fits the kind of profile of the investment that we do, we will consider [it].” Mr Onyeagwu had said at the conference call.

Speaking further, the Zenith Bank chief said, “On the opportunity to acquire any of the retail lender; first is that we will continue to grow organically, that is our primary goal. If we find anything that is strategically relevant and would add reasonable value to us, we will look at it.

“We will not just do acquisition for the sake of doing it, we will do it [because] there is money to be made, there is incremental value, not for cosmetic reasons.”