Former chairman of FBN Holdings, Oba Otudeko is reported to be behind the over four billion shares of FBNH that were transacted on the NGX on Thursday, July 6th, 2023.
TheTimes confirmed this from traders on the Exchange with knowledge of the transaction.
The trade has ratcheted up allegations over the validity of the trades considering that no single shareholder hitherto officially owned as many shares.
Cardinal Stone and Rencap handled the transaction which shocked capital market operators considering the size of the deal. TheTimes reported that trade is valued at about N76 billion and is one of the largest single trades recorded for the stock this year.
A press release explaining the trade is yet to be released on the NGX as of when this artice was written.
Deal sparks of speculations
FBNH has about 35.8 billion shares outstanding as of December 2022 audited accounts, thus around 12.2% of the shares were traded.
- The Bank’s last audited accounts place billionaire investor, Femi Otedola as the highest shareholder of the bank with a direct and indirect holding of 5.57%.
- Thus market analysts are pondering how a sale of this magnitude may have been consummated on the assumption that no shareholder had enough shares to sell not to talk of the 11% that was traded.
TheTimes is yet to establish what specific role Otudeko played in the transaction and who the other parties are.
However, several speculations point to the sale being conducted between Otudeko’s entities some of whom may be proxies within the bank
What we have learnt
Another reliable source who pleaded anonymity suggests this may be connected to the pending Ecobank appeal at the Supreme Court over the implementation of liquidation proceedings against Honeywell Plc, of which Oba Otudeko was the majority owner.
Honeywell has since been acquired by Flour Mills Plc in a deal announced in 2022. Ecobank had warned Flour Mills to steer clear, but the deal went ahead.
Another source who did not want to be mentioned by name postulated that the transaction may have been motivated by the need to disperse the shares across various proxies.
- “When you want to avoid a court judgement on your asset, especially shares, you do not disclose all your holdings. Doing that might expose your assets and can be taken over. To further make it difficult for the shares to be acquired, you can spread it across proxies who are listed as shareholders in other names.”
These sorts of transactions are executed via cross-deals between buyers and sellers at a price often determined ex-market.
On why so many shares were traded despite not being previously disclosed as significant shareholding, another expert explained that this is often done to avoid scrutiny from the central bank.
- “If you are a shareholder of a bank and you take insider loans from the bank, you must not take more than 1% of the shareholders funds unimpaired by losses.”
- “The central bank frowns at this and if they find out, the directors or shareholders will need to repay the loans or in the alternative, the bank will be forced to increase its shareholders funds.”
According to Section 3 of the CBN’s Prudential Guidelines for Deposit Money Banks
- “A director or a significant shareholder shall not borrow more than 1 percent of shareholders’ funds unimpaired by losses.”
- It also states that “the aggregate credit facilities to all insiders and their related parties shall not exceed 10 percent of shareholders’ funds.”
This provision is for any director or shareholder with a stake of 5% or above raising concerns over market anomalies taking place on the NGX.
Regulators at the Security and Exchange Commission are also thought to be monitoring this transaction.
Checks by TheTimes on the website of the NGX reveal no official statement is yet to be made by the bank holding company or anyone.
- However, we understand a press release will be issued soon by the bank as soon as they receive notification of the trade from the parties involved.
- Deals like this are reported on the NGX as part of its insider dealings rules.
What traders are saying
Former President of the Chartered Institute of Brokers (CIS) and the Managing Director of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe in an exclusive chat with TheTimes stated that FBN Hodings is one of the most liquid stocks in the nation’s stock market.
Amolegben noted that the bank has a very large float which makes the stocks susceptible to this kind of large transaction.
- “With the recent changes we have seen in the ownership structure of the bank, it is expected that various stakeholders will continue to strengthen their positions by acquiring many shares,” Amolegbe said.
The Executive Vice Chairman of Hicap Securities Limited, Mr. David Adonri said that the over 4 billion units of FBN Holdings Plc shares have been traded on the NGX on Thursday was a strategic investment or divestment.
He noted that it may not be connected with the struggle for the soul of the organization.
- “Strategic investors are taking positions to acquire controlling interest in the company. This means that the board of the bank may be worried because membership of the board can be changed at any time. This is because a strategic investor may be acquiring to own the bank. This can affect the stability of policies that the directors may be formulating for the management of the bank on day-to-day operations,” Adonri said.
About 30 million shares of the stock have been traded as of when this article was written. The bank’s share price is currently N20.20.