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This is the 3rd and final part of the UBA/STB Merger story featuring TOE.
Oblige us by rt the first tweet of this thread.
Oblige us by rt the first tweet of this thread.
Follow this link ICYM Part 1 & 2 of the story;
1. Flash Back
2. On March 9, 2004 a newspaper headline read out boldly “UBA Loses N11.08bn in Market Value."
3. It was just 5 days after the shocking resignation of banking Mogul, Hakeem Bello Osagie, HBO. The Central Bank’s instruction on March 2nd
4. required that he resign from the board with immediate effect or it would dissolve the board unilaterally.
5. The CBN also directed that the bank disengages the its Vice-Chairman, Mallam Abba Kyari,
6. and its Executive Director of Corporate Affairs, Mrs. Mairo Bashir.
7. Mallam Abba Kyari, the current Chief of Staff to President Buhari was once the Managing Director of the bank
8. The CBN’s order was so stern, it did not give HBO and his board any room to wait to meet till March 23rd to perhaps contact the powers
9. that be to change its select a successor that would, at least, do their bidding.
10. Just like in African Politics, choosing the right successor is one of the most important decision of a bank CEO/Owner.
11. Because UBA was yet to inform the NSE of the resignation of its chairman, it faced another round of sanctions by the stock exchange.
12. The stock market had enough already, and a sell off ensued in no time
13. The bank’s share price plunged 28% from a 2004 high of N15.48 per share to N11.14 as at Fri, March 5, 2004.
The sh*t had hit the fan
The sh*t had hit the fan
14. As a change of guard befell UBA, Nigeria’s 3rd largest bank at the time, another loomed at the CBN.
15. The CBN Governor, Joseph Sanusi’s term was ending and he promptly informed President Obasanjo of his intention not to seek another.
16. In his place was an erudite 44-year-old Professor who was a member of the economic team and
17. the architect of the economy policy of the OBJ Government, NEEDs.
18. On April 30th 2004 and in a huge departure from the norm, the government appointed Professor Charles Soludo as the new CBN Governor.
19. This was the first time, Nigeria would have a CBN Governor who was not from the banking industry and
20. while economist cheered, bankers welcomed him with cautious optimism. This one someone they didn't know quite well and couldn't decipher
21. Soludo was young, confident, assertive and had a year earlier been blamed for making a comment that briefly crashed the naira.
22. There was palpable fear that such a man could upend the status quo in the banking sector
23. Soon, Soludo would proof them right
24. On Tuesday, July 6, 2004 Prof. Soludo announced N25 billion as the new capital base for Nigerian banks, up from N2 billion.
25. He also fixed December 2005 as deadline for banks to comply.
26. The news sent shock waves round the banking system with newer generation banks seething.
27. The Senate Kicked against it and promptly summoned Soludo to come and explain what in the world he was thinking.
28. The Nigerian Labour and the Manufacturing Association of Nigeria complained that it would lead to another run on the banking industry.
29. As the country stood in shock and react in frenzy, TOE went into stealth mode.
30. He would disappear from the scene in the last quarter of the year plotting how his bank, Standard Trust will survive its next big threat
31. Just as TOE had predicted years earlier, the banking industry faced a massive consolidation on a scale never to be imagined.
32. To avoid being a target and getting caught up in the impending storm, they had to act fast
33. and so TOE immediately changed the strategic direction and ideology of the bank.
34. The new STB will emerge in the form of a Lion relying on Size, Efficiency and being Brutal to confront its future.
35. FAST FOWARD
36. Before that faithful call to HBO, TOE had watched proceedings in UBA over the last few months.
37. Like a patient lioness waiting to pounce on a wounded prey, he quickly realised that of the three biggest banks, UBA was most vulnerable
38. As the situation in the bank deteriorated, coupled with the rising tensions following
39. the N25 billion capital base, negotiations with HBO stepped up in the background.
40. Sources reveal he set up committees to run the day to day operations of the bank while he disappeared from the scene for 3 months.
41. By January 2005 he reappeared calling a meeting of all staff from manager levels and above.
42. It was to break the news that their bank, STB, was going to acquire/merge with UBA Plc, Nigeria’s third largest bank.
43. Those present at the meeting were stunned in disbelief. No one knew this audacious acquisition was indeed in the offing.
44. STB had the balance sheet to meet the CBN’s deadline but the goal of acquiring a bigger bank was daunting.
45. Just months before, STB had acquired Continental Trust Bank, a relatively smaller bank and a testing ground for what to come
46. After breaking the news to employees, on July 18, 2005, UBA/STB would announce to the world of their plan to merge into “one big bank”.
47. As the banking industry pondered the implication of what had just happened, TOE informed some selected VIPs personally of what happened.
48. This was another page from his playbook.
To understand how TOE operates, the book, 48 laws of Power is perfect guide.
To understand how TOE operates, the book, 48 laws of Power is perfect guide.
49. The first law, "Never outshine the master" was a particularly stark attribute.
Always make those above you feel comfortably superior.
Always make those above you feel comfortably superior.
50. That night, he picked up the phone and dialed all the people he knew who could influence the deal, either positively or negatively.
51. It was psychologically important that they hear from him directly before reading it on the pages of the newspaper the next day.
52. Law 43,
“Work on the hearts and minds of others”
was at play.
“Work on the hearts and minds of others”
was at play.
53. Soon after the announcement, TOE formed several sub committees tasked with seeing through the deal.
54. A month later, February 4th to be precise, the STB team arrived UBA to commence
55. negotiations on what would be the largest merger in Nigeria’s banking history.
56. The financial sector had never witnessed a merger of this proportion and scale & so UBA had to hire Mckinsey to help midwife the merger.
57. Sources suggest that Mckinsey had a playbook for mergers like this and set out to implement it.
58. Soon, bureaucracy will get in the way. As negotiations slowed and tasks piled up, TOE became increasingly frustrated.
59. According to sources his unorthodox ways manifested during this period.
60. TOE was renowned for moving around with a small team of loyal insiders who implemented some of his more pertinent targets.
61. The team of loyal insiders were referred to as “Marines” by staff, some of whom dreaded their rising influence.
62. These guys rose to prominence in the early days of branch expansions, moving in at the behest of TOE
63. to deliver when it appeared that, project timelines were not being met risking cost escalations and embarassments.
64. The Marines hardly failed to deliver.
65. They over the years built a fearsome reputation as TOE’ henchmen. And so once again, they would become handy in the toughest task yet.
66. At some point, committee members for the merger risked being rendered irrelevant, especially if they failed to deliver on crucial tasks.
67. The marines would move in and step up activities.
Sometimes, to deliver on tough tasks, use a small team that is focused and nimble
Sometimes, to deliver on tough tasks, use a small team that is focused and nimble
68. Their age, experience and levels were irrelevant.
The only thing that mattered were their tenacity and ability to execute on orders
The only thing that mattered were their tenacity and ability to execute on orders
69. Challenges sprung from all angles. TOE, against popular reason, had insisted that the merger would not result in loss of jobs.
70. This was a key aspect of the merger & one narrative he wanted to be associated with the merger.
The optics always mattered to TOE.
The optics always mattered to TOE.
71. Merging an old & new generation bank was tough to execute considering the many psychological, adminsitrative & financial implications
72. Mergers are expected to produce synergies but many don't realise the non financial cost associated with achieving this daunting task
73. There were a lot of challenges that lie with execution. For example, the employees at UBA earned about twice as much as those in STB.
74. A Manager in UBA earned less than an Assistant Manager in STB. A morale and psychological hurdle to deal with
75. How would they compensate the Manager in the Old UBA without blowing the budget?
76. How would they slash the salaries of the AM’s in STB without hurting morale?
77. It all seemed like a zero-sum game which was frankly not an option.
TOE and his team decided on an action plan.
TOE and his team decided on an action plan.
78. They would promote the AM’s in STB to full Managers while they retained their salaries levels.
79. The Managers in the old UBA remained managers but would have their pay increased.
It seemed like a fair deal.
It seemed like a fair deal.
80. Being who we are, insatiable homo sapiens, some STB employees saw this as a huge opportunity. They had to cash in
81. Now a Manager in the new UBA but without a pay rise, the STB employee would have to figure out a way to cash in on this upgrade.
82. To meet this goal, the insatiable few, would approach other banks for possible hiring. Being a staff of STB had inherent financial value
83. For example, a newly promoted Manager in the new UBA who did not get a pay rise
84. would take a job in another bank as a Manager but with a pay rise. The money they could not get in STB, they got in another bank
85. In their quest to boost staff morale by introducing pay equality, STB started losing key employees.
You can't please everyone in life
You can't please everyone in life
86. There was even a much larger problem for TOE.
The merger also meant some management level staff had to be exited or managed
The merger also meant some management level staff had to be exited or managed
86. In one prominent case, the position of Chief Risk Officer for UBA gave TOE his biggest challenge.
88. Up there was a promising top executive by the name, Sanusi Lamido Sanusi.
An economist and one of the sharpest minds at the bank.
An economist and one of the sharpest minds at the bank.
89. From STB was another up and coming star and a member of TOE’s inner circles, Victor Osadolor, the ED risk at the bank.
90. SLS, though a chief risk office,r was well connected and had lineage linked to the Emirates in the northern city of Kano.
91. TOE, one not to keep foes went at length to appease everyone. No raw deals for sensitive people that could be a problem in future
92. Everyone was important, no mater how small, nonetheless someone with links to the high echelon of elite northern Nigeria.
93. SLS would not report to VO and Vice Versa.
As a student of Machiavellian principles, TOE knew he had to manage this deftly.
As a student of Machiavellian principles, TOE knew he had to manage this deftly.
94. Amid the storm that was raging in UBA, other banks also saw an opportunity.
95. While they had missed out on the acquisition, they would not miss out on potential significant hires
TOE still had a decision to make
TOE still had a decision to make
96. Fortune, they say often favours the brave; People like TOE always had a break when none seemed plausible
97. SLS would be poached by the rival First Bank Plc in September 2005.
3 years later, on August 2008,
3 years later, on August 2008,
98. First Bank announced SLS would be the MD/CEO of First Bank when its MD/CEO Mr. Jacobs Moyo Ajekigbe retired on December 31, 2008.
99. 6 months after assuming as CEO of First Bank, he would be announced the Governor of the Central Bank of Nigeria.
100. Another bone of contention was the name of the new bank. TOE’s inner circle preferred to retain the name STB,
101. But TOE had a broader view of the deal and knew optics mattered. STB was in the driving seat but the name
102. “United Bank for Africa” aligned with his vision to be the number one bank in Africa.
103. And so, to remember their heritage, they would put beside the name UBA, a logo of STB
104. On August 1, 2005, Tony Onyemaechi Elumelu assumed the position of MD/CEO United Bank for Africa.
105. The merger was concluded and STB ceased to exist.
106. The merger required that two ordinary shares of STB will exchange for one ordinary share in UBA.
107. The old UBA guard would have about 8 of their directors either resign or retire including the Managing Director, Aliyu Dikko.
108. STB on the other hand had about 7 appointed to the board of the new UBA, signifying who was on the driving seat
109. By 2006, UBA had a total board of directors of 14 members with TOE as MD/CEO and Kayode Sofola as Chairman.
110. The merger also created a behemoth of 380 new branches, the largest in West Africa.
111. UBA and STB’s 5 million and 2 million depositors respectively also made them a formidable force in Nigeria's retail banking space.
112. STB had exchanged 4 billion of its shares for 2 billion of shares in UBA at a value of N10 per share,
113. bringing the purchase consideration to about N20 billion. By September 2006,
114. the first annual report of the merged bank, UBA’s balance sheet sized had risen from N332b to N1 trillion.
115. The bank’s net assets also rose N19.4 billion to N48.5 billion.
116. Gross Earnings also rose from N26 billion to N90.4 billion while profits rose from N4.9 billion to N11.5 billion
117. Earnings per share however dropped from 263 kobo to187 kobo, the effect of an increase in shareholdings due to the merger.
118. POST MERGER FROM THE REAR VIEW
119. The deal between UBA/STB remains today as one of the most significant event in Nigeria’s corporate history.
120. Critics might point to the fact that the merger has so far fallen short of some of its lofty expectations such as
121. being the number bank in Nigeria nonetheless, Africa and one of the largest in the world.
122. Rather than being nos 1,10 years after this landmark merger, it remains the 3rd largest bank in Nigeria in terms of balance sheet size.
123. In terms of Market Capitalization, it is also the 3rd at about N340 billion.
The merger is by and large a success
The merger is by and large a success
124. But perhaps, the most valuable thing about this merger was the lessons learnt for generations to come.
125. In a country where opportunities are rare for those from humble backgrounds, if you dare to dream, you will succeed
126. With determination, tenacity, focus and ambition, anything is possible if you’ve got brains.
We have come to the end of this 3 part series.
We will like to thank our new sponsors @BluechipTechNG
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We will like to thank our new sponsors @BluechipTechNG
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They want to see Corporate Stories & news continue and have decided to sponsor our research and keep the guys @Nairametrics motivated
An article version of our 3 part series will be available on Nairametrics website on Monday. You can also get other corporate stories there
Until we meet again in a few weeks time for another #NMCorporatestories it's good bye and have a profitable day.
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*End*
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