Atlas Mara Sells Stake to Revive Nigerian Ambitions

LAGOS (Capital Markets in Africa) – Atlas Mara Ltd., which has dropped almost 80 percent since an initial public offering led by co-founder Bob Diamond, plans to raise more than its market value by selling a 35 percent stake to Fairfax Africa Holdings Corp.

The firm expects to get $200 million from selling new stock to existing shareholders and Fairfax Africa and will also issue a fresh convertible bond to the Toronto-based investment company, the company said in a statement on Wednesday. Atlas Mara will use the proceeds to boost its holdings in Union Bank of Nigeria Plc to 44.5 percent from about 31 percent.

Atlas Mara, which owns banks in seven African countries, has plunged in value since its December 2013 IPO after growth across the continent slumped and currencies weakened amid a commodities rout. Diamond, 65, in February ousted Chief Executive Officer John Vitalo and pledged to cut annual operating costs by $20 million after rising expenses threatened the company’s ability to expand through acquisitions.

Union Bank, Atlas Mara’s single biggest investment in Africa, is Nigeria’s worst-performing bank stock this year. It announced plans to raise capital through a rights issue in November as the country’s small- and mid-sized lenders struggled to cope with a contraction in the economy of Africa’s biggest oil producer.

Atlas Mara agreed to acquire an indirect 13.4 percent shareholding in Lagos-based Union Bank from the Clermont Group for $55 million, it said. Union Bank is going through regulatory approvals and will then start the share sale, spokeswoman Ogochukwu Ekezie said.

‘Like-Minded’
“A strategic partnership with Fairfax Africa creates a strong relationship between two like-minded, long-term investors in Africa,” Atlas Mara said. “Each is focused on capitalizing on the long-term growth potential of Africa and provides permanent capital to support growth.”

The partnership with Fairfax Africa, which last year bought Zurich Insurance Group AG’s South African business and rebranded it Byte Insurance, will give Fairfax four of the nine seats on Atlas Mara’s board. A new management incentive plan will also be put in place, while Diamond will continue as Atlas Mara’s executive chairman, the company said. Existing investors face a dilution of about 35 percent, according to data compiled by Bloomberg.

Fairfax Africa agreed to buy at least 30 percent of the $100 million of new shares at a price of $2.25 apiece, representing an implied purchase price of 0.33 times book value, the company said in a separate statement. Atlas Mara’s stock has traded at an average this year of $2.26, according to data compiled by Bloomberg. The shares rose 1 percent to $2.54 as of 1:05 p.m. in London, giving the company a market value of $197.5 million.

“Banks are at the forefront of economic development in sub-Saharan Africa,” Prem Watsa, Fairfax Africa’s chairman, said in the statement. “Atlas Mara represents a unique opportunity to invest in many profitable banks in the region at a very attractive valuation.”

Source: Bloomberg Business News