The Republic Bank, a Caribbean-based financial powerhouse, has been cleared by the Supreme Court to takeover HFC Bank.
This means that the bank can continue with the process to make a mandatory offer to all shareholders of HFC Bank, to enable the Trinidadian bank increase its 40% stake in HFC to its takeover target of 51%.
The Trinidadian bank has already made a mandatory offer of GH¢1.60 to shareholders of HFC bank in order to assume full control of the bank, which was halted by a suit initiated by HFC to stop the takeover.
Led by Justice William Atuguba, the five-member panel including Justices Sophia Akuffo, Vida Akoto-Bamfo, Baffoe-Bonnie and Sule Gbadegbe, on Wednesday 17th December 2014, dismissed the suit initiated by HFC Bank against Republic Bank and the SEC, which was upheld by Justice Koomson in a High Court ruling.
The suit, filed by HFC Bank, was an attempt to prevent Republic Bank proceeding with a mandatory offer to all shareholders of HFC Bank after Republic Bank had acquired more than 30 percent of its shareholding.
The court made an order prohibiting the high court from proceeding any further with the suit and set aside the writ filed by HFC Bank.
After Republic Bank acquired more than 30 percent stake in HFC Bank, it was required by the Takeover Code of the SEC to make a mandatory offer to all the shareholders of HFC.
However, the takeover process by Republic Bank has been characterised by controversy as the posture of some of the biggest individual shareholders of HFC Bank and the board show resistance to the takeover process — as they find Republic Bank’s approach too hostile.
The management of HFC initiated an action in the High Court to prevent the process of the mandatory offer from going ahead. Two other court cases initiated by some stakeholders of HFC also sought to restrain Republic Bank from making a mandatory offer to all shareholders.
In both cases, the courts upheld objections by lawyers for Republic Bank and decided against the attempt by the plaintiffs to have the courts restrain Republic Bank from proceeding with the mandatory offer to shareholders.
Robert Le Hunte, Director of African Operations at Republic Bank said: “Republic Bank is pleased with the ruling of the Supreme Court. Based on this ruling by the highest court of the land, Republic Bank will continue the process as outlined by the Takeover Code which was halted by institution of the proceedings by HFC Bank.
“We have always acted in accordance with the laws of Ghana and regulations of the SEC, and will continue to do so,” he said.
He added that the Caribbean bank looks forward to continue contributing significantly in the economic growth of HFC Bank, Ghana and Africa over the coming years. “We assure our stakeholders of our long-term commitment and dedication to achieving success.”
Derrick Asare Mensah, Senior Analyst at African Alliance Securities, believes that the impact of this takeover is free float — which is an amount of shares available on the market for trading — will be reduced and liquidity will be affected because the parent company, Republic Bank, will likely never trade its stock.
“A lot of fund managers and investors don’t like that, and this is going to be a bit troubling. There will also be little price discovery in the stock.”
But he added that on the positive side, if the company performs magnificently on the stock market — since there will be very little stock to float on the market — shares will be trading at a premium, which is good for existing shareholders.
For the banking industry, Mr. Mensah added that the influx of bigger banks into the system will enhance competition, which could lead to a general reduction in prices of loans and reduce the monopoly of some Tier-1banks.
“If the local banks want to play in the big league they will need to get their acts together. If they don’t have the capital and muscle, then they should consolidate instead of growing at a slower pace. I think the more we have bigger banks come into the economy, the better for us,” he added.
Republic Bank first purchased 8.79 percent shares in HFC Bank Ghana for an amount of US$8million in December 2012 after invitations from the commercial arm of the World Bank, the International Finance Corporation (IFC).
The bank bought the stake when HFC floated 112,420,246 ordinary shares under a private placement.
Republic Bank’s stake further increased to 32.02 percent after buying 23.23 percent additional shares which were previously held by Aureos Africa Fund LLC.
On Friday, June 7, 2013, Republic Bank acquired 68,854,703 ordinary shares at no par value in HFC Bank Ghana Limited from Aureos Africa Fund LLC at a price of GH¢0.56 per share.
It further acquired 7.98 percent additional shares in 2013 from Union Bank of Nigeria, increasing its shareholding in the bank to the current 40 percent.
