A United States-based private equity firm, Milost Global Inc, is currently conducting due diligence on one of Nigerian banks in preparation for possible acquisition, New Telegraph has learnt. In a report issued in Mongolia by Nasdaq Global Wire, Capital Bank of Mongolia Ltd and Soyombo Insurance Ltd. announced that they had executed a $255 million financing term sheet with Milost Global Inc. Although the identity of the financial institution was not disclosed, the company said their target was for a bank with over 250 branches across the country.
Providing a hint into the interest, Senior Partner and Chief Operating Officer of Milost Global Inc., Bernard B. Yaw, said some banks in emerging economies were still weighed down by the after effects of the 2008 global financial crisis. According to him, “In response to the deficiencies in financial regulation with the after-effect of the financial crisis of 2007-2008, Basel III was introduced globally to attempt to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage. “A lot of banks, especially in the emerging countries, are struggling to meet the Basel III requirements.
Those that can find ways to recapitalise and strengthen their Tier I capital requirement will be winners and will leapfrog over those who are lagging. This gap is definitely opening investment opportunities to Milost Bank Corporation to acquire and partner with these well run, but undercapitalised banks in many emerging countries.” According to the report, Milost Bank Corporation, through its African subsidiary, Milost Bank Africa Limited, is conducting a due diligence of a Nigeria bank that has over 250 branch operations, with a purpose of acquiring full control.
It noted: “Through this transaction, Capital Bank, Soyombo Insurance, Capital Brokerage and Capital Asset Management have agreed that they will be controlled by Milost Bank Corporation, whereas Milost Bank Corporation will acquire a controlling interest in all four companies.” Commenting on the bank’s investment spree, the Chairman of Capital Bank of Mongolia and Soyombo Insurance Ltd., A. Ariunbold, stated: “We are delighted that Milost Global Inc. has agreed to finance Capital Bank and Soyombo Insurance Ltd, strengthening and growing our position as a nationwide bank and insurance company in Mongolia. We see this as an exciting opportunity for both companies, our shareholders, and our respective teams of bankers.”
Last year, at least two financial experts predicted another round of mergers and acquisitions in the banking industry due to perceived liquidity squeeze currently hitting the banks. According to the Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, the economic storm in the country could lead to some realignment in the sector to prevent possible collapse.
He observed that ongoing economic crisis and the spate of non-performing loans could affect the banks’ profitability initially and eventually affect their liquidity and solvency. Similarly, foremost economist, Prof. Pat Utomi, said good mergers and acquisitions strategy could help prevent crisis in the sector and avoid a regulatory risk. He said: “There is nothing good or bad about mergers and acquisitions on its own. The question is whether it will amount to creating value or not. It happened in the United States in the 1980s.”