First Bank Goes for a Record-Setting Jumbo Share offer

Nigeria's leading Bank, First Bank of Nigeria Plc, is in the capital market with an elephant-sized share offer - a N100 billion hybrid of a rights offer and an offer for subscription. The offer opened 14th May, 2007 and is to close on 21st June, 2007. Given that several share offers have lately hit the market, it needed the muscle and confidence of a market leader to bring an offer of this magnitude - rightly dubbed 'the BIG ONE' - into the market at this time. Analysts however strongly believe that, with its pedigree, the bank would have no difficulty in getting the offer mopped up.

The funds will principally go into branch expansion and modernisation process and to boost equity investment in key subsidiaries like FBN Bank (UK) Limited and FBN Mortgages Limited. A significant 28.3% (N27.14 billion) is also earmarked as working capital enhancement.

The rights component is for 1,496,762,682 ordinary shares of 50kobo each at N31 per share to raise N46.40 billion, while the public offer element aims for 1,624,253,238 ordinary shares of 50kobo each a N33 per share for a value of N53.60 billion.

Existing shareholders, the beneficiaries of the rights offer, are entitled to buying one rights share for every seven shares held as at 25th April, 2007. As permitted by regulation, a rights owner who, for any reason cannot pick up his rights either in full or partly, has the option of trading the renounced rights on the floor of the stock exchange. Such rights will be traded in the period 14th May - 21st June, 2007. Existing shareholders also have an option to apply for additional shares over their rights entitlement.

Each application under the offer for subscription is for a minimum tranche of 500 units and in multiples of 50 thereafter. Payment is in full, on application. Given that the bank has indicated its readiness to absorb any excess applications, subject to the required approvals, investors have no reason for any anxiety about partial allotment.

Should you invest? The performance track record of FirstBank makes this a compelling investment. Its sustained leadership position in the banking sector has ensured a consistently healthy earning record and sound financials, while its dividend policy has proved rewarding to investors from year to year. With current effort at securing its share of the market and attaining further growth, there is strong reason to expect continued trending up of performance in earnings and returns to shareholders. Investors will however do well to consult their stockbrokers and financial advisers for professional evaluation.