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How Otedola Masked Accumulation of First Bank Shares

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Femi Otedola, the Nigerian billionaire businessman that just acquired a 5.07% stake in tier-one lender First Bank of Nigeria used numerous vehicles to conceal his accumulation of shares in the bank, various sources tell MoneyCentral.

News broke last week that Otedola had taken a major stake in First Bank of Nigeria worth several billions of naira, which was confirmed to MoneyCentral by sources. What this invariably means is that being one of the largest shareholders, he holds the high voting shares and can dictate the direction of the bank through his voting power.

“We reckon he built his stake through a number of vehicles, including custody/nominee accounts,” one source speaking to MoneyCentral said. “This provides him anonymity in the stake build up stage.”

A nominee is a person or firm whose name is titled on securities or other property to facilitate certain transactions or transfers while leaving the original customer as the actual or legal owner. In this way, a nominee can serve as a custodian.

Some major custodian firms in Nigeria include Stanbic Nominees, UBA Global Investor Services, Standard Chartered Nominees, Citi Nominees, First Nominees, and Zenith Nominees.

A second source told MoneyCentral that the accumulation must have happened over a 6 months to 1-year timeframe, and that there was renewed emphasis to snap up shares once Oba Otudeko the erstwhile largest shareholder in the bank got into trouble with the Central Bank of Nigeria (CBN).

“He may have had some shares before and also bought off the market from some major block holders, which have not yet been crossed in the market, or he may have decided to maintain such vehicles by just buying the vehicles holding the shares from such block shareholders,” the second source said.

In April 2021, the CBN Governor Godwin Emefiele disclosed that insiders of First Bank of Nigeria who took loans in the bank with controlling interest on the board of Directors, failed to adhere to the terms of restructuring of their credit facilities, which contributed to the poor financial state of the bank.

“The CBNs recent target examination as at December 31st 2020 revealed that insider loans were materially non-compliant with terms of restructure of the loans,” Emefiele said.

“For example non perfection on liens on shares and collateral arrangements that CBN had insisted on for over 3 years, despite several regulatory reminders.”

The CBN in a letter to the former Chairman of the Bank dated April 26th, 2021, said the bank had not perfected its lien on the shares of Oba Otudeko in FBN Holdco which collaterised the restructured credit facilities for HoneyWell Flour Mills contrary to conditions precedent for the restructuring of the company’s credit facility.

Sources tell MoneyCentral that Otedola may have purchased the block Otudeko shares placed on lien, as at the end of the second quarter (June 2021) FBN Holdings (FBNH) booked sundry income of N14.575 billion.

Sundry income, also called miscellaneous income or other operating income, is generated from sources other than a company’s normal business operation.

Examples of sundry income include royalties, foreign exchange gains, profits on the sales of assets, and late fees.

“First Bank booked the huge recoveries of N14.575 billion from previous provisions,” a banking source speaking on condition of anonymity told MoneyCentral. “I suspect it is a takeover or sale of an asset for a loan previously provisioned and likely related to Oba Otudeko’s loans with the bank,” the source added.

A third source told MoneyCentral that Otedola spent billions of Naira on the transaction.

FBN Holdings (the parent company of First Bank) had a market capitalisation of N439.7 billion at the close of trading on Friday, meaning a 5.07 percent stake would be worth N22.29 billion.

“If you know him well you will know that he will keep on increasing his stake in the bank,” the source said.

Whatever the case and despite the attempts to mask his share purchases in First Bank the smart money had already sniffed out that something big was in play as First Bank shares began rallying hard about a month ago.

First Bank shares are up 103 percent in the past one year and are up some 52 percent since September 30 alone to trade at N12.25 per share on Friday from N8.05 per share back then.

Meanwhile, FBN Holdings Plc the parent company of First Bank of Nigeria says it received a notification from APT Securities and Funds Limited that their client Otedola Olufemi Peter and his nominee, Calvados Global Services Limited have acquired a total of 1,818,551,625 unit of shares.

FBN Holdings has an issued share capital of 35,895,292,791 shares, meaning that based on the foregoing the equity stake of Otedola and his nominee in the Company is now 5.07%.

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