Inside Story of Zenith Bank Proposed Merger With Union Bank

MICHAEL AKINOLA

Zenith Bank Plc has reportedly been given the green light to merge or acquire Union Bank Nigeria Plc. 

Sources within the two banks said talks are currently ongoing between the banks and a tentative arrangement may have been reached to commence due diligence.

Zenith Bank is Nigeria’s largest bank by profits and second by total assets and could increase its size significantly further with a potential acquisition or merger of this magnitude.

Any merger between the banks will surely require the blessing of Jim Ovia, the Chairman and Founder of Zenith Bank, but no clear decision has been made on such deal. 

This medium gathered that Union Bank owners, Atlas Mara with a 49 per cent stake has been under pressure to exit their African holdings.

In February 2019, Atlas Mara co-founder Bob Diamond announced he was resigning his post as Chairman of the company.

The company said it was looking at selling off banking assets in countries where it was not the dominant player.

In January 2020, Union Bank sold its United Kingdom subsidiary to MBU Capital Limited, a London-based management investment firm, after emerging as the most preferred bidder.

According to the bank, “This sale is aligned with Union Bank’s strategy to geographically streamline its business operations to focus on growth opportunities in Nigeria.”

Union Bank also recently raised N20 billion in Series 3 & 4 Commercial Paper after successfully raising N24.3 billion through the issuance of the Series 1 and 2 of its N100 billion commercial paper programme.

However for Zenith Bank as a potential merger with Union Bank, it could be for two main reasons.

Firstly, a merger will firmly solidifies Zenith Bank’s position as the largest bank by total assets after falling second to Access Bank with N7.1 trillion. It will also gives Zenith Bank control over several juicy assets and right of ways owned by Union Bank from its legacy years.

Another reason could also been as a result of the Central Bank of Nigeria’s nudging. The Apex Bank, sources said, would not tolerate another nationalization of a bank the size of Union Bank and thus favourably disposed to the merger move by Zenith Bank.

Meanwhile the result sheet of both banks are in the positive. In a notification that was sent to the Nigerian Stock Exchange (NSE), Union Bank Group recorded a 10.3 per cent growth in profit.

The profit before tax as of December 31, 2019, was N20.35 billion as against the N18.45 billion that was achieved for the corresponding period for 2018.

For Zenith Bank, on the other hand, it reported a record profit after tax of N208 billion out of a gross earning of N662 billion.

Zenith Bank’s net assets of N941.8 billion dwarfs Union Bank’s net assets of N252 billion as of 2019.

Union Bank share price closed at N6 with a market cap of N174 billion as on Friday, March 13.

Zenith Bank closed at N11.90 or N373 billion and trading at a price to earnings multiple of 1.79 compared to Union Bank’s 7.28.

Just last week reports filtered out that Nigeria’s oldest bank, First Bank was also on track to merge or acquire both Polaris and Heritage Banks respectively.

The leading bank has not denied or confirmed the reports. Just as well as Polaris Bank and Heritage Bank.

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