Nedbank Group Ltd., the South Africa lender controlled by Old Mutual Plc, plans to exercise an option it has from next month to buy a fifth of Ecobank Transnational Inc. in a deal valued at more than $500 million.
Nedbank intends to take up its right to convert a $285 million loan made to Ecobank in 2011 into an estimated 11 percent stake, said Mike Brown, chief executive officer of the Johannesburg-based lender. A second subscription right allows Nedbank to increase its holding in Togo-based Ecobank to as much as 20 percent, he said, without giving a timeframe for the plan.
“It is our current intention to exercise our rights,” Brown wrote in an e-mailed response to questions, saying that the bank hasn’t taken a formal decision to proceed. “We have always anticipated that the total cost to get to a 20 percent shareholding will be greater than the original loan.”
Ecobank, which trades on three African exchanges and operates in 33 nations on the continent, reported last month that profit increased 65 percent to $250 million in the nine months through September as its businesses in Nigeria and Ghana expanded. While Ecobank has the reciprocal right to buy a stake in Nedbank, CEO Thierry Tanoh said in May that the lender may delay taking this option to focus on its African operations.
Nedbank has a 12-month window, starting in December, to convert the loan into Ecobank shares.
Nedbank formed an alliance in 2008 with Ecobank. The Togolese lender, founded in 1985, also operates in France and has representative offices in Beijing, Johannesburg, Dubai and London.
The Public Investment Corp., which manages more than 1 trillion rand ($99 billion) mostly on behalf of South African government workers, bought almost 20 percent of Ecobank in April last year, making it the lender’s biggest shareholder. Ecobank Chairman Kolapo Lawson plans to step down on Dec. 31 amid allegations of fraud that are being investigated by Nigeria’s capital markets regulator.
Nedbank rose less than 1 percent to 210.05 rand by the 5 p.m. close in Johannesburg, paring this year’s gain to 12 percent. The six-member FTSE/JSE Africa Banks Index advanced 4.4 percent over the period.