Diamond's Atlas Mara Announces Buyback, Nears Zambian Deal

  • Posts profit for third-quarter after year-earlier loss
  • Plans acquisition of Zambian bank by first quarter of 2016

Atlas Mara Ltd., the African finance company co-founded by Robert Diamond, said it’s in talks to acquire a Zambian bank and will buy back as much as $10 million of its own shares, two months after some investors called on the former Barclays Plc chief and other executives to purchase stock.

The company announced the buyback Thursday as it reported third-quarter profit of $7.1 million, compared with a pro-forma loss of $38.7 million a year earlier. Atlas Mara has fallen 29 percent in London this year, prompting the criticism for failing to purchase shares trading at less than book value. The stock rose 9.1 percent to $6 as of 12:57 p.m., the highest in more than two months.

Atlas Mara's slump since its IPO prompted calls for buybacks
Atlas Mara's slump since its IPO prompted calls for buybacks

The board of the firm, which Diamond set up with Ugandan entrepreneur Ashish Thakkar in 2013 to acquire African banks, has approved the resumption of the share buyback program, it said in Thursday’s statement. The founders and other executives will also buy stock, it said. Thakkar said on a conference call from Oslo that “this underscores our continued confidence in Atlas Mara.”

Atlas Mara’s executive committee invested more than $1 million in company stock earlier this year, the statement shows. Diamond said Aug. 28 that he and his colleagues were restricted then from purchasing more shares. “We can’t say why we’re prohibited,” he said at the time. “We’re very bullish.”

Zambian Deal

Following its swing to profit this year, Atlas Mara said it’s in advanced talks to acquire Finance Bank of Zambia Plc by the first quarter of 2016 in a cash and stock deal. Atlas Mara anticipates acquiring FBZ, as the lender is known, for about $60 million in cash and 2.6 million Atlas Mara shares, valued at $14.3 million at yesterday’s close.

The transaction will “result in the creation of Zambia’s largest bank by branch network and fifth largest bank by assets with combined assets of approximately $418 million,” the company said. The price could increase to $61 million plus 5.7 million Atlas Mara shares, depending on the exchange rate and whether the company meets profitability targets, among other conditions.

The Zambian deal would follow the acquisitions of ABC Holdings Ltd. and ADC African Development Corp. and the purchase of a stake in Union Bank of Nigeria Plc. last year in addition to two transactions in Rwanda. FBZ would be combined with ABC’s operations in Zambia, according to Atlas Mara.

FBZ is valued at a price-to-book ratio of about 1.3 times, John Vitalo, chief executive officer, said on the same conference call. “Once all the transactions are done we will be among the top three to five participants in four of the six countries” in which Atlas Mara operates, he said. The company targets a return on equity of 20 percent within the next three to five years.

Valuations of sub-Saharan African banks are at or near multi-year lows, Atlas Mara executive Brad Gibbs said on the call. “It’s an opportune time to be acquiring and investing.”

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