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Spring Bank acquisition : Aggrieved shareholders may be accommodated — Sanusi

By Peter Egwuatu
Indication has  emerged that the aggrieved shareholders of Spring Bank Plc may regain their investment from Bank PHB Plc .
The Governor of Central Bank of Nigeria (CBN), Lamido Sanusi has said that the aggrieved shareholders of the contentious Spring Bank may be accommodated under the current dispensation  following the sack of the managing directors and executive directors Spring Bank and Bank PHB.

President Musa Yar’Adua’s  endorsement of the actions taken so far by the CBN on the eight banks, particularly Bank PHB and Spring Bank, is a tacit approval of the impartial and transparent work and recommendations made by the minister in the report on the acquisition.

It would be recalled that the minister was asked by Mr. President to review the acquisition of the report based on protest by aggrieved investors in the bank.
The removal of the managing directors of Bank PHB and Spring Bank is an indication that the President may have tacitly  endorsed the report of the Hon. Minister.


When asked  if the aggrieved shareholders of Spring Bank would be considered in the current scheme that necessitated the removal of its managing director alongside two others, during an interactive session with newsmen at the just concluded 2009 annual meetings of the World Bank/International Monetary Fund (IMF) in Istanbul, Turkey, Sanus said the  most reasonable thing to do is to look for a way of accommodating them. From a practical perspective what will seem to be a most reasonable thing to do is to see in what manner some accommodation can be reached with the aggrieved shareholders and in what manner their interest can be taken into consideration in any kind of arrangement that Spring Bank gets into in the future.

This is the only way I see this happening, otherwise, it’s going to be very difficult.”When asked if he would implement the recommendations of the Minister of State for Finance, Remi Babalola that the acquisition of Spring Bank by Bank PHB last year was improper?  He, however, said that he was yet to receive any formal communication from the presidency. I have not seen that report. I have not received any formal communication from the presidency on that report. And I cannot act on the basis of the newspaper reports.

The second issue is that if there is a matter in a court of law, it is the court that would decide, it is not the CBN. They had court-ordered Extra-ordinary General Meetings and there were transactions. So, at the end of the day, it is left to the court to decide whether those transactions were legal.

The complication with the Spring Bank case was that the money didn’t go into the bank, it went to shareholders.

So, it is going to be very difficult for me to envisage what will happen.  Are you going to ask the shareholders to pay back the money to BankPHB Or is the bank going to pay back the money on behalf of shareholders who have taken the money? Is that a solution? I don’t know and I don’t want to pre-judge anything and I don’t want to pre-empt any decision” he said. The Babalola report, dated March 31, 2009,  addressed to President Umaru Musa Yar’Adua, and submitted to the Chief Economic Adviser to the President, Dr. Tanimu Yakubu, had recommended that the president should ask that the Ministries of Finance and Justice  to convene a meeting of the CBN, Securities and Exchange Commission (SEC), Nigeria Deposit Insurance Corporation (NDIC) and the principal parties involved in the Post Merger Adjustment (PMA) exercise to resolve all the outstanding issues within three months from the date of its meeting.

The report also asked the CBN to invoke its powers under Sections 33, 36, 37, 38 and 39 of the Banking and Other Financial Institutions Act (BOFIA), should the PMA not be concluded within the said time frame.

Spring Bank was the coalescing of six banks – Citizens Bank, ACB International Bank, Fountain Trust Bank, Guardian Express Bank, Omega Bank and Trans International Bank – all known in the 2005 consolidation parlance as Legacy Banks.

To achieve the conditions stipulated in the banking consolidation exercise, which mandated banks to have a minimum of N25 billion each, representatives of the merging banks had executed a Head of Agreement, which categorised the Legacy Banks into two groups – Citizens Guardian Group (CGG) and Bank One Group (BOG).

In the agreement, there were provisions that upon due diligence and capital verification, a reasonable time would be given to make adequate merger adjustments where there was material change.
Also, there was an agreement that a PMA would be undertaken upon the composition of the banks and its organs of administration by shareholder representatives of these banks within a year of post-consolidation.
Some shareholders had insisted this was never done, and this was seen as the genesis of the board squabbles that tore the groups within Spring Bank apart.

Bank PHB was alleged to have illegally taken over majority stakes in Spring Bank by a group of shareholders. The aggrieved shareholders had complained that Bank PHB did not follow due process in acquisition of the shares totalling about three billion.

Bank PHB, which had earlier bought some substantial stakes in Spring Bank, had late last year, announced the successful completion of its mandatory bid, which it opened November 28, 2008, for the acquisition of over three billion shares of Spring Bank Plc. Bank PHB had opened a bid for more than three billion units of Spring Bank in its bid to take its stake to 51 per cent to give it controlling stakes in Spring Bank.

The aggrieved shareholders of Spring Bank were granted another injunction against Bank PHB’s purported takeover of Spring Bank Plc by the Federal High Court, sitting in Abuja on  December 19 2008.

Other agencies that were restrained from going ahead with the acquisition, which the shareholders alleged had been widely plagued with accusations of fraud, include CBN, SEC, Nigerian Stock Exchange (NSE), First Registrars Limited and the Interim Management Board (IMB), whose tenure closed on December 31 2008.

The court order was sequel to a suit instituted by some aggrieved shareholders of Spring Bank Plc, who claim that Bank PHB did not meet the statutory requirements to make the so-called mandatory bid advertised on December 1, 2008 where it sought to acquire majority shareholding in the Bank.


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