Pan-African lender Ecobank Transnational Incorporated has scrapped a sale of part of its Nigerian business because falling market values mean it wouldn’t get a good enough price, according to Chief Executive Officer, Ade Ayeyemi.
“The market is not right for us to be selling part of that unit,” Ayeyemi, 52, who started the job last month after quitting as Citigroup Inc.’s CEO for sub-Saharan Africa, said in an interview in London Tuesday. “We will not be doing any dilution at the moment. You cannot sell an asset you don’t have to sell at the time when market prices are at the bottom of the trough,” Bloomberg quoted him to have explained.
Ayeyemi’s predecessor Albert Essien said in June the lender would sell a stake in Ecobank Nigeria Ltd. by the end of 2015 to boost the unit’s capital. This was planned because the Nigerian central bank raised minimum capital thresholds.
Ecobank’s shares have fallen 12 percent in Lagos, Nigeria’s commercial hub, since the end of June, amid concern among investors that a slowdown in China, sub-Saharan Africa’s biggest trading partner, and a looming rise in U.S. interest rates may weigh on economic growth. Togo-based Ecobank operates in 36 African countries, more than any other lender.
Ecobank was considering raising as much as $400 million with a sale of up to 25 percent of the Nigerian subsidiary, Arqaam Capital Ltd. said in a September note.
“We are adequately capitalised at the moment,” Ayeyemi said. “If there are business opportunities that require us to have more capital, we will support that. We always have the option in future.”
The bank’s biggest shareholder, Nedbank Group Limited said it was against being diluted by a sell down of the Nigerian business, which is Ecobank’s largest. The South African lender spent almost $500 million buying a 20 percent stake less than a year ago.
“By raising tier 1 capital at subsidiary level, you’re possibly diluting those who own Ecobank from the holding company level,” Mfundo Nkuhlu, chief operating officer at Johannesburg-based Nedbank, said in an interview at Bloomberg’s offices on September 23. “Any capital raise needs to be economically sensible to the holding company shareholders.”