Nedbank Group said on Thursday it will acquire a 20 percent stake in pan-African lender Ecobank for $493 million, ending months of speculation the South African bank would walk away from the deal over governance concerns.
Nedbank, South Africa’s fourth-largest lender, had a right to acquire the stake under the terms of a 2011 loan to Ecobank. But a crisis over corporate governance and the departure of Ecobank’s chief executive in March raised questions about whether Nedbank would go through with the deal.
Nedbank will pay $493.4 million in cash for new Ecobank shares, it said in a statement.
Nedbank Chief Executive Mike Brown told Reuters in August that Ecobank had made “enormous progress” on resolving its governance issues.
Transaction is expected to result in an approximate 80 basis points pro forma reduction in Nedbank Group’s common equity tier 1 ratio under basel 3, which was 12,1% at 30 June 2014
It will subscribe for 4 512 618 890 new ETI shares to be issued for a cash consideration of $493,4 million
Post transaction, Nedbank group will remain strongly capitalised and its common equity tier 1 ratio will be well within group’s published internal target range of 10,5% to 12,5%.
Nedbank has nominated its chief operating officer, graham dempster, to join ETI board.
Its investment in eti will be at an effective price of usd10,93 cents per share.
Eti will exercise its reciprocal right to an appointment on Nedbank Group board. All necessary regulatory approvals have been received and transaction is unconditional.
