Although the struggle for the controlling shares in First Bank Holdings Plc is rubbing positively on its share price, capital market watchers said the role of regulatory authorities in clarifying the positions of the contenders is non-negotiable, writes Festus Akanbi
The rally in the shares of First Bank Holding Plc which manifested few weeks ago, leading to the appreciation of the share price of the company was sustained last week, even after a clearer picture of the shareholding structure of the bank were put in the public domain.
As at the close of trading on Friday, October 29, FBN Holdings Plc (FBNH) closed its last trading day at N11.05 per share on the Nigerian Stock Exchange (NGX), recording a 5.2% drop from its previous closing price of N11.65 and the volume traded was 57 million as against 163 million unit of shares of FBNH traded the previous day. FBN began the year with a share price of N7.15 and has since gained 62.9% on that price valuation, ranking it 18th on the NGX in terms of year-to-date performance.
However, the sustained appreciation of the bank’s shares notwithstanding, watchers of the unfolding development said it is too early to decide who is the majority shareholder in the bank given The Exchange’s queries on the status of the shareholding of the chairman of the holding company and the majority shareholder, Tunde Hassan-Odukale, who currently holds 50.36 per cent stake.
Regulatory Approval
Some analysts also believe that capital market regulatory authorities hold the key for the determination of who the majority shareholders of the bank at the end of the verifications.
The indirect shares in FBNH are owned through entities like Leadway Assurance and its related companies. Leadway Assurance the privately-held and largest insurance company in Nigeria is owned and run by Tunde Hassan-Odukale.
An analysis of First Bank’s annual report shows that Hassan-Odukale’s direct stake in FBN Holdings was 8,854,003 units while his indirect stake was 360,961,091 units as at the end of 2020.
As at October 26, Hassan-Odukale’s direct interest in the bank is 26,231,887 units while entities he controls indirectly own 1,897,280,212 units in the financial holding company.
In one of the queries about why they classified the shareholdings of Mr Tunde Hassan-Odukale and his related parties into two parts of 4.16% and 1.20% respectively, the bank claimed that while Mr Tunde Hassan-Odukale held shares of 4.16% directly and indirectly, the 1.2% was “ascribed” to him (Mr Odukale) due to “his influence and having significant control” over the companies holding the shares.
Some capital market operators however, faulted the claims of FBNH in its defence of the spread of Odukale’s shareholding. One critic, who declined to be named, for instance, explained that investments by Pension Funds Administrators in quoted companies are usually done on behalf of the Custodians. Typically, the funds are classified in the name of the Pension Fund Custodians and that of the PFA.
Another analyst added that the operators of the PFAs are not directors of companies that they invest in to avoid conflict of interest. For example, a PFA will not invest in a company where one of its directors or related parties has shares.
According to Section 6 6.1 iii under the Regulation on Investment of Pension Fund Asset of February 2019, “The PFA or any of its agents are prohibited from investing Pension Fund Assets in the shares or any other securities, issued through public or private placement arrangements, by the following Related party/person of any shareholder of the PFA.” This is perhaps the reasons for not assigning shares owned by the PFA as “indirect shareholdings” of Mr Odukale.
In addition, Section 6.3 of the same guideline also “prohibits PFAs from selling their assets to related party/person of any shareholder of the PFA,” suggesting that shares of the Pension Fund cannot be sold to a related party of Leadway Group.
As it is, all eyes are on the Securities and Exchange Commission (SEC) to vet the various claims by the major shareholders of the bank.
A pointer to the readiness of the regulator to halt the descent into squabbles over the controlling structure of the bank was the appointment of Meristem Registrars as its new registrars replacing First Registrars and Investors Services Ltd.
Market sources quoted by Nairametrics, an only medium said the latest move to take out First Registrars is connected to the recent shareholder squabbles and may have been instigated by the bank regulators who are embarrassed by the degenerating situation. The source explained further that First registrars had to be taken out due to the conflict of interest it has since it is a subsidiary of First Bank.
One of the first tasks for Meristem Registrars will likely be to review the register of shareholders of FBN Holdings and determine who the majority shareholders are. They will also determine the quantum of direct and indirect shares owned by the current directors of the bank holding company.
The Game Changer
FBNH became a news maker two weeks ago when the company, in a letter to the Stock Exchange confirmed the report which had fingered the Mr. Femi Otedola as the new investors behind the recent mop-up of the company’s shares in recent times.
Having ramped up his shareholding to 1.82billion units of shares amounting to 5.07per cent of the total share capital of the company.
However, his stake in the company fell short of that of the incumbent chairman and majority shareholder, Hassan-Odukale, whose direct and indirect shareholding in the bank total 1.9 billion units.
Put together, all the shares linked to Hassan-Odukale bring his stake equivalent to 5.36 per cent of First Bank’s total outstanding shares and makes him the single largest shareholder.
FBN Holdings has outstanding shares of 35,895,292,792 units valued at N418.180 billion as at Wednesday October 27.
Some analysts who spoke with THISDAY last week said with the announcement of the appointment of former Managing Director of Fidelity Bank, Nnamdi Okonkwo as the Group Managing Director of FBNH will increase the rally in the shares of the holding company in the weeks ahead.
The announcement, which was described as a masterstroke, is said to be capable of reducing tension created by the recent jostle for the control of the bank. Okonkwo, who resumes in January next year, is taking over from U. K. Eke, whose tenure expires in December this year.
Investors’ Confidence
Analysts also believed the new struggle for the controlling shares in FBNH will engender investors’ confidence, going further. The struggle for control, according to Executive Director, Cordros Capital Limited, Mr. Olufemi Ademola is caused by the vacuum created by the current travails of former Chairman of the holding company, Oba Otudeko.
“In my opinion, the current jostling that we are seeing between the bank’s majority shareholders is due to the void created by the exit of the former board chairman, Oba Otudeko. Every organisation requires at least a significant personality, individual or institution that try to control the affairs of the company and influence things. Such influence brings focus and stability in the positive ways. Although, such control could also be used negatively, the real benefit of a significant or control shareholder lies in the provision of strategic direction and constancy.”
He maintained that the influence; hitherto provided by Mr. Otudeko is what is up for grabs among the remaining significant shareholders in the bank.
“For an organisation with diverse shareholders like FBN Holdings Plc, a 5% stake is significant enough to attract a board seat and to influence board decisions. No doubt, the existing shareholders would prefer that this control and influence is exercised by one or some of them rather than a new investor. ‘
“However, as a publicly quoted, there is no much the shareholders can do to prevent the entry of new investors. While it is difficult to be exact on what the bank would benefit, it can be expected that the presence of more influencers on the board of the bank would help better decision making from diverse ideas and suggestions from board members.
“The bank can also benefit from having to do more businesses with the associated companies of the new investor and thus increase profitability, ”he stated.
The Fear
Ademola said unless the major shareholders are aligned in their interests, avoidable rivalry could polarise the board.
He said as a foremost bank in Nigeria with very strong pedigree, diverse significant shareholders can benefit FBNH immensely. However, the most significant fear is that of destructive competition among the majority shareholders. Rather than collaborate to move the bank forward, if they compete to outwit each other, it may become injurious to stakeholders of the bank. However, positive competition in terms of business development and contribution to sound decision making is a welcome development.”
By committing their resources to the bank, analysts believed the majority shareholders are sending the right signals to the investing community that the bank is solid. This was the view of the Managing Director/Chief Executive, SD&D Capital Management Limited, Mr Idakolo Gabriel Gbolade. According to him, “First Bank Holdings will definitely benefit from the battle because of the renewed interest in its shares by the major shareholders of the bank. With the entrance of Mr. Femi Otedola into the major shareholders category, it will bring more confidence to the investors and shareholders of the bank.
“The bank also stands to benefit from the wealth of experience of Mr. Otedola who is a turnaround expert having done that with his previous oil company and other investments.”
Shareholders Call for Caution
Reacting to the media frenzy over the statuses of two majority shareholders in the bank, founder and former National Coordinator of the Independent Shareholders Association of Nigeria (ISAN), Mr. Sunny Nwosu, said it is not in the interest of the organisation for anybody to engage in media war.
“What are they struggling for? Whether you have what you have now or not, considering the way the Companies and Allied Matters Act and the Board Charter work, the management will have to make recommendations because they (the management) are there on a daily basis to see the way the business is going for the board to either approve or disapprove.
“The way these things are going, the kind of noise that is being made over the claims of being the largest shareholder will have negative effects on the bank,” he said.
“When depositors start pulling out their money that they do not want to be caught in the web of fighting for the control of the bank, you will see that the bank’s assets will be eroded and as a result of that, whatever you must have put there as investment will also be at risk. So, they should stop all these media war. Issues about banks are always very conservative. It is not a kind of issues to be treated on the pages of newspapers.”
