Atlas Mara to sell a stake
Atlas Mara, hit by a drop in its share price of almost 80% since its initial public offering, plans to raise more than its market value by selling a 35% stake to Fairfax Africa Holdings.
Atlas Mara, hit by its share price falling almost 80% since its initial public offering (IPO), plans to raise more than its market value by selling a 35% stake to Fairfax Africa Holdings.
The company, led by cofounder Bob Diamond, said on Wednesday that it expected to get $200m from selling new stock to existing shareholders and Fairfax Africa. It would also issue a fresh convertible bond to the Toronto-based investment company. Atlas Mara would use the proceeds to boost its holdings in Union Bank of Nigeria to 44.5%, from about 31%.
Atlas Mara, which owns banks in seven African countries, has plunged in value since its December 2013 public offering as growth on the continent slumped and currencies weakened amid a commodities rout.
In February, Diamond ousted then CEO John Vitalo and pledged to cut annual operating costs by $20m after rising expenses threatened its ability to expand through acquisitions.
Union Bank, Atlas Mara’s single biggest investment in Africa, is Nigeria’s worst-performing bank stock in 2017. It announced plans to raise capital through a rights issue in November as the country’s small and mid-sized lenders struggled to cope with a contraction in the economy of Africa’s biggest oil producer.
Atlas Mara agreed to acquire an indirect 13.4% shareholding in Lagos-based Union Bank from the Clermont Group for $55m, it said. Union Bank was going through regulatory approvals and would then start the share sale, spokeswoman Ogochukwu Ekezie said.
“A strategic partnership with Fairfax Africa creates a strong relationship between two likeminded, long-term investors in Africa,” Atlas Mara said.
The partnership with Fairfax Africa, which in 2016 bought Zurich Insurance Group’s South African business and rebranded it Byte Insurance, would give Fairfax four of the nine seats on Atlas Mara’s board.
A new management incentive plan would be put in place, while Diamond would continue as Atlas Mara’s executive chairman, the company said.
Existing investors face a dilution of about 35%, according to data compiled by Bloomberg.
Fairfax Africa agreed to buy at least 30% of the $100m of new shares at $2.25 apiece, representing an implied purchase price of 0.33 times book value, the company said.
Atlas Mara’s stock has traded at an average of $2.26 in 2017, according to data compiled by Bloomberg. The company has a market value of $197.5m.
“Banks are at the forefront of economic development in subSaharan Africa,” said Fairfax Africa chairman Prem Watsa.
“Atlas Mara represents a unique opportunity to invest in many profitable banks in the region at a very attractive valuation.”