Zenith Bank clears air, denies binding offer to acquire any bank

Zenith Bank Plc has cleared the air that it has no binding offer to acquire any financial institution. The bank disclosed this in a statement it issued to the Nigerian Stock Exchange on Tuesday.

The statement signed by the Company Secretary of the bank, Michael Otu, read, “Zenith Bank notes certain recent internet and social media reports suggesting a proposed acquisition of Union Bank Plc by Zenith Bank. We hereby state categorically that Zenith Bank has not made any binding offer to acquire any financial institution.”

Meanwhile, Nairametrics had reported that Zenith Bank Plc has been given the green light to merge or acquire Union Bank Nigeria Plc. The leading financial news platform got wind of this from a reliable source. We understand talks are currently ongoing between the banks and a tentative arrangement may have been reached to commence due diligence.

Zenith Bank is Nigeria’s largest bank by profits and second by total assets and could increase its size significantly further with a potential acquisition or merger of this magnitude.

Sources from both banks denied any merger plans have been concluded but will not deny or affirm if talks are ongoing. Sources also inform Nairametrics that some executives of both banks are not favourably disposed to a merger while others are. Any merger between the banks will surely require the blessing of Jim Ovia, the Chairman and Founder of Zenith Bank, and we now also understand no decision has been made. One of our other sources also claims that he denied any such deal.

We did not expect an affirmation of a deal at this stage. Nairametrics also got a similar response when it contacted sources in First Bank for the reported merger with Polaris Bank and Heritage Bank.

But is it true there are no merger talks: In 2018 Access Bank and Diamond Bank also denied any merger plans when we reached out to them when the initial merger news broke. Both banks eventually announced a deal and consummated a merger in December 2018. Deals like these are typically not confirmed until the clearance is obtained from the Securities and Exchange Commission.

Why the merger: It is not immediately clear why both banks will be considering a merger, however, Union Bank owners Atlas Mara with a 49% stake has been under pressure to exit their African holdings. Last year (February), Atlas Mara co-founder Bob Diamond announced he was resigning his post as Chairman of the company. The company said it was looking at selling off banking assets in countries where it was not the dominant player.

Earlier in January, Union Bank sold its United Kingdom subsidiary to MBU Capital Limited. The London-based management investment firm acquired Union Bank UK after emerging as the most preferred bidder. According to the bank, “This sale is aligned with Union Bank’s strategy to geographically streamline its business operations to focus on growth opportunities in Nigeria.”

Union Bank also recently raised N20 billion in series 3&4 commercial paper after successfully raising N24.3 billion through the issuance of the Series 1 and 2 of its N100 billion commercial paper programme.

Why Zenith: We believe for Zenith Bank a potential merger could be for two main reasons. Firstly, a merger firmly solidifies Zenith Bank’s position as the largest bank by total assets after falling second to Access Bank with N7.1 trillion. It also gives Zenith Bank control over several juicy assets and right of ways owned by Union Bank from its legacy years.