Diamond Bank's $400 Million Domestic GDR Offer Gets an Extension
Acceler8now.com, November 3, 2007
Nigeria's Bank PHB unveiled its new N85 billion share offer, November 19. The innovative bank is offering 5 billion ordinary shares of 50 kobo each at N17 per share, in an IPO that will run from November 19 to December 19, 2007.
Major business targets for application of the funds, as contained in the offer prospectus, include:
- Retail and Head Office Infrastructure
N14.826 billion (18.19%)
- First Class Training School
N1.483 (1.82%)
- Technology Upgrade and Acquisition of ATMs
N7.907 billion (9.70%)
- Centralised Shared Service Centre (Back Office Operations)
N2.965 billion (3.64%)
- Project backed Transactions (Corporate Finance and Project Finance)
N7.413 billion (9.10%)
- Regional expansion (Pan African strategy)
N14.826 billion (18.19%)
- Equity Investment in Subsidiaries
N4.942 billion (6.06%)
- Working Capital
N27.142 billion (33.30%)
Bank PHB has had a good run on the Nigerian Stock Exchange, after being listed, following its private placement, then at N1.95 per share, in 2005. The stock's price had hit a high of N35 per share before adjustment for dividend and bonus issue. At the current market price of N25.51, the new offer is at a 33.35% (N8.51) discount. Given the bank's growth track record and impressive financial statistics, it is not difficult to judge, in a general sense, that it's current offer presents an investment that will ultimately yield above-average returns.
Meanwhile, Diamond Bank Plc is also out to raise additional capital, but is using the window of Global Depository Receipts (GDR), a capital issue option that is becoming popular with Nigerian banks. Diamond Banks' $500 million GDR sale commences November 20, 2007 and will be listed on the Professional Securities Market of the London Stock Exchange.
While GDRs usually target international investors, Diamond Bank has noted that Nigerian institutional investors are being courted to significantly invest in the offer. $400 million out of the $500 million offer is consequently reserved for Nigerian investors, the bank said. Investors in the GDR can also readily convert them to ordinary shares of Diamond Bank, after allotment. While Morgan Stanley is the Global Coordinator and Bookrunner of the offer, Nigerian capital market operator, Vetiva Capital Management Limited is the Domestic Coordinator and Joint Domestic Underwriter. IBTC Chartered Bank Plc, PlatinumHabib Bank Plc, Access Bank Plc, Ecobank Nigeria Plc, BGL Securities Limited, Afribank Capital Markets Limited, Fidelity Bank Plc, Greenwick Trust limited and Sterling Capital Markets Limited are co-domestic underwriters.
GDRs are becoming an attractive capital-raising source for Nigerian banks. GTBank, Access Bank, First City Monument Bank and Fidelity Bank have recently sought funds through that window. Diamond Bank's Group Managing Director, Mr Emeka Onwuka, was upbeat about the central value of the offer to the bank when he said "the London listing is an important next step in the evolution of Diamond Bank’s strategy and is aimed at raising capital for growth, attracting new shareholders and raising our international profile".
Diamond Bank had, in April 2007, received a major injection of capital through the acquisition of a 19% stake in it by emerging market investor, Actis Capital LLP. That brought in some $134 million, which gave the bank a major boost. With the current planned fund inflow, Diamond BAnk looks geared for a major expansion in business scope and a rising market profile.
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