Shareholders reject scheme of arrangement proposed for Union Bank and Oando acquisitions

May 11, 2023May 11, 2023 Stan

Article Summary

Minority shareholders of Union Bank and Oando in Nigeria are dissatisfied with the proposed schemes of arrangement to acquire their shares by the majority shareholders.
Shareholders are challenging the exit prices offered, calling for fair value in the price.
Shareholder associations have called on regulators and the government to ensure that minority shareholders’ interests are protected, and are planning to resist virtual EGMs.

Some minority shareholders have expressed their dissatisfaction with the scheme of arrangement proposed by Titan Trust Bank Limited and Ocean and Oil Development Partners Limited (OODP) to acquire all the shares of minority shareholders in Union Bank Plc and Oando Plc respectively.

The shareholders have stated that the considerations for minority shareholders are unacceptable and will be challenged at the companies’ Extra Ordinary General Meetings (EGMs) to ensure fair value in respect of exit price.

Union Bank Plc recently disclosed that its core shareholder, Titan Trust Bank Limited, has made an offer to acquire the shares of all minority shareholders in the bank. The transaction will be implemented by way of a Scheme of Arrangement between the bank and the bank’s shareholders (the Minority Shareholders). Under the terms of the scheme, the outstanding shares of the bank not already held by Titan Trust will be acquired for a consideration of N7.00 per share.

Similarly, Oando Plc disclosed that it has received an offer from its core shareholder, Ocean and Oil Development Partners Limited (OODP), to acquire the shares of all minority shareholders in the company. Following the acquisition, the company will be delisted from NGX and JSE and re-registered as a private company. Under the Scheme, each Scheme Shareholder shall be entitled to receive the sum of N7.07 in cash or its equivalent in South African Rand (ZAR) for every ordinary share held by qualified Scheme Shareholders at the Effective Date of the Scheme.

Oando and Union Bank are not the first companies to receive a buyout request from their majority shareholders. However, the shareholder association leaders who spoke to Nairametrics complained about the exit price offered to buy out the shareholders.

Reactions from shareholder associations

In reaction to the development, Mr Patrick Ajudua, the President of the New Dimension Shareholders Association, who spoke to Nairametrics exclusively, noted that the ultimate protection of minority shareholders is important in terms of giving shareholders value for the share purchase.

Addressing regulators, he stated that “it is the primary duty of the regulator to ensure that in given approval of the scheme of delisting, the interest and protection of minority shareholders must be paramount in their hearts.”

Ajidua spoke specifically to the price being offered by both companies suggesting that it was far from satisfactory to them as shareholders. He called on the management of the companies to ensure fair treatment of the minority shareholders in their exit plans.

“As shareholders, the prices being offered by Titan Trust Bank and Oando are far from satisfactory to us. So, we are calling on the management of the companies to ensure fair treatment of the minority shareholders in their exit plans. That would take care of our concerns. The shareholders in the EGMs will engage the companies with a view to getting fair value in respect of the exit price. We will take the liberty at EGMs to call for an upward review of the price,“ he said.

He also called for shareholders to “resist” the attempt to “short-change” them requesting that the Extra Ordinary General Meeting must not be conducted virtually as this will further place the bank at an advantage of stage managing the meeting” to obtain an approval

The National Coordinator of the Independent Shareholders Association of Nigeria (ISAN), Mr Moses Igbrude, also expressed worry about how Union Bank and Oando Plc would conclude to pay shareholders N7.00 and N7.07, respectively, as an exit price. He also lamented the paucity of returns over the years and suggested minority shareholders have been left worse off due to a lack of dividend payments and a reduction in shareholder value.

“After the core investors acquire the majority shares, over the years they run down the business under the watch of regulators. By not paying dividends and not making a good return on investments to shareholders and the prices of shares are now low, which is grossly undervalued, both companies are now using the opportunity to sell some of the assets of the companies. Using the same money realized to pay out minority shareholders instead of sharing the profits as a special dividend.”

According to Moses Igbrude, the National Coordinator of the Independent Shareholders Association of Nigeria (ISAN), the proposed exit prices for minority shareholders by Union Bank Plc and Oando Plc are “unacceptable and morally wrong.” Igbrude also called on the Nigerian government to intervene and protect minority shareholders from core investors who are fellow Nigerians.

Igbrude expressed concern that the companies may have the resources to sway the outcome of the Extraordinary General Meetings (EGMs), despite objections from minority shareholders. He plans to protest at the EGMs but has also urged that they should not be conducted virtually.

He believes that a virtual EGM could potentially put the bank at an advantage in stage-managing the meeting and obtaining “undeserved approval” for the exit plan, which he feels would not fairly compensate minority shareholders who have suffered from non-consistent dividend and bonus issues over the years.

Moving forward

The proposed deals to acquire all shares of minority shareholders in Union Bank Plc and Oando Plc are set to proceed, despite objections from some shareholders. The promoters of the deal believe that it is in the best interest of the companies and their majority shareholders, as well as that of the minority shareholders.

Oando has been grappling with legal battles that have threatened the going concern status of the business for years. The proposed acquisition by Ocean and Oil Development Partners Limited (OODP) is seen as a solution to these legal issues, which would allow the company to re-register as a private company.

Similarly, Union Bank has faced financial problems, which led the previous majority shareholders to sell their stake. Titan Trust Bank Limited, which took over from Union Bank, believes that the bank’s legacy issues are not of their making. They are committed to doing whatever it takes to move the bank forward and ensure that the minority shareholders’ interests are protected.

Despite concerns raised by some shareholders, the deals are expected to proceed as planned. The promoters of the deal believe that it is in the best interest of not just the companies and their majority shareholders, but also of the minority shareholders.