Union Bank seeks to raise N50bn as rights issue opens

Nigerian lender, Union Bank, opened a rights issue to its shareholders Wednesday, which it said would enable it raise N50 billion ($159 million). It followed approval from regulators, the bank said.

The bank, in a statement made available to Businessamlive, said the rights issue would stay opened between September 20 and October 30 and would involve an offer of 12.1 billion shares at N4.10 per share with shareholders entitled to buy five new shares for every seven they already hold.

The second tier bank said it planned to spend 80 percent of the funds to enhance its regulatory capital and boost working capital.

Once regarded as one of Nigeria’s top three banks in the days when it reigned supreme in the country’s banking industry with old generation banks such as First Bank and United Bank for Africa, Union Bank was slow to respond to the changes in the operating environment, especially with the coming of such new generation banks as Zenith, Guaranty Trust Bank, among others. This was compounded by the global financial crisis of 2008/2009. The entry of foreign shareholders have seen an attempt at the resurgence in the last couple of years, say analysts who cover the banking sector.

Atlas Mara Ltd, the African investment vehicle of former Barclays boss, Bob Diamond, which owns a 22.1 percent stake in the bank, has said it planned to raise funds also to tap opportunities to lend to agribusinesses.

In June, Atlas Mara Ltd said it was raising $200 million to increase its stake in Union Bank and other businesses. It said at the time it was buying a 13.4 percent stake in Union Bank from Clermont Group, making its total holding 44.5 percent.

Clermont International is among a consortium of local and foreign investors that own 65 percent, Union Bank said in its rights circular, adding that it was not aware of any investor trying to acquire a majority stake.Shares in Union Bank have gained 9.1 percent so far this year, then fell to 4.67 percent on Wednesday to ₦5.70 on the Lagos bourse, a 28 percent premium to the rights price.

By Bukola Odufade