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| Business |
| NBM consortium fails to buy Zambian bank |
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by
Ephraim Munthali, 10 March 2005
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16:45:38
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National Bank of Malawi’s (NBM) bid to buy Zambia National Commercial Bank (Zanaco) has suffered a set back, after losing the deal to a South African Bank.
NBM’s joint bid with other international financial institutions came second to Amalgamated Bank of South Africa (ABSA), according to National Bank deputy chief executive George Partridge.
National Bank teamed up with Wendy Peter Abt (WPA)—an emerging market fund specialising in investing in African banks, especially privatised entities. After acquisition, the Malawian bank would have had the management contract.
WPA is funded by HSBC, International Finance Corporation (IFC), European Investment Bank and FMO—a Netherlands investment and finance company.
“We didn’t choose the partners, the partners [WPA] chose us. They looked at our strength, reputation, capital base and management. They found that we could be ideal partners,” he said.
But Partridge indicated that all is not lost yet because the offer has a provision that would see the second placed bidders coming in, should negotiations with the preferred investor fall through.
He said NBM’s bid, submitted in May 2003, was seen as the local bank’s only way of penetrating the Zambian market which he described as “over banked”.
The Zanaco takeover would have added value to National Bank’s shareholders in terms of dividends, management fees and reputation, said Partridge.
He said pride was another benefit because it would have demonstrated that NBM can also be a force to reckon with in the region.
“We have heard of other institutions in Malawi having to be managed by companies abroad. Here, our expertise was being sought to manage a bank abroad,” the banker said.
But Partridge said the failure has not affected his bank in any way because the investment that could have been used to partially buy Zanaco will be put to alternative use or in other ventures when another opportunity arises.
He said National Bank is still looking at ways of growing organically through what he called “sensible acquisitions” which it can afford and can fit into its strategy.
Partridge could, however, not divulge further details on why their consortium failed to buy Zanaco. He explained that NBM is still bound by the confidentiality agreement signed between the bidders on one hand and the Zambia Privatisation Agency (ZPA) on the other.
Zanaco—perceived in Zambia as a strategic partner in national development—is one of the biggest local banks with 52 branches and agencies, and employed 1,379 people as at December 31, 2002.
The bank has total book assets worth US$223.7 million (MK24 billion), sits on deposits of about US$157.1 million ( MK17 billion) and has total cash and cash equivalents estimated at US$135.6 million (about MK15 billion).
According to ZPA, Zanaco controls around 22 percent of the banking market in Zambia. The agency wants to sell 49 percent of the government of Zambia’s shareholding.
The Zambian authorities want a regional or global bank as a strategic investor, with a strong branch network, correspondents and affiliates.
They also wanted bidders with a minimum worth of US$500 million (MK54 billion) in total assets or market capitalisation (current market value of the company).
Zambia also wanted bidders to have experience in running a large branch network with a presence in remote areas in addition to having strong management capabilities and a proven record of increasing shareholder value.
But reports indicate that Zambian trade unions are not happy with Zanaco’s sale, fearing job losses and capital flight—especially when the successful bidder itself, ABSA—faces a takeover by UK banking group, Barclays.
Observers also frown at the moral justification for the World Bank to press Zambia to privatise Zanaco when they want to buy the bank themselves through IFC which is a branch of the Bretton Wood institution.
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