Wema Bank Plc has transferred its majority equity stake in the 56-year-old Great Nigeria Insurance (GNI) Plc to Insurance Resourcery and Consultancy Services Limited in a deal worth N3.24 billion.
A transaction document obtained by The Nation at the weekend showed that the divestiture was concluded last week with the transfer of Wema Bank’s shares to Insurance Resourcery through a special purpose window of the Nigerian Stock Exchange (NSE).
The report showed that a total of 2.87 billion ordinary shares of 50 kobo each of GNI were crossed in a single deal to Insurance Resourcery at N1.13 per share through the negotiated cross deal window of the Exchange.
The cross deal, which was done through the off-market, negotiated cross deals window, was not subjected to the dynamics of price discovery for the particular period as off-market trade implies that the deal was sealed outside the floor of the NSE.
The negotiated cross deal platform of the Exchange is a special-purpose trading platform that is meant for voluminous transaction. By the cross deal, it implies that the buyer and the seller had been prearranged and the transfer at the stock market was a mere perfection of the agreement between the two. The negotiated cross deal allows the parties to the deal to close the deal at reduced cost.
At N1.13 per share, the transaction cost represents 126 per cent increase on the current market value of GNI, which has stagnated at its nominal value of 50 kobo per share. GNI currently has total paid up capital of 3.827 billion ordinary shares of 50 kobo each with a market capitalisation of N1.91 billion.
A market pundit said the transaction cost further underlined the undervaluation of several stocks at the Exchange, coming after recent audit showed that Conoil’s net asset per share was higher than its market price.
The Nation had reported earlier that authorities at the NSE, where both Wema Bank and GNI are listed, had approved the divestment.
GNI started operations in 1960 and its businesses include general and life insurance.
Following Central Bank of Nigeria (CBN)’s banking regulatory regime that required banks to either divest from non-core banking subsidiaries or form a holding company to hold those subsidiaries, Wema Bank had opted to divest from its non-core banking businesses including GNI. The bank had since divested from Wema Insurance Brokers Limited, Wema Registrars Limited, Independent Securities Limited and Whyte Cleon Limited. It also integrated operations of four subsidiaries into its core banking business including Wema Asset Management Limited, Wema Securities and Finance Plc, Wema Homes (Savings and Loans) Limited and Wise Properties Limited. Wema Bank had 100 per cent equity stakes in the trio of Wema Registrars, Wema Insurance Brokers and Whyte Cleon Limited while it had 94.7 per cent stake in Independent Securities and 75 per cent in GNI.
Meanwhile, the new core investor, a relatively unknown firm, will be required to restructure GNI’s issued share capital to dilute the existing concentrated shareholdings of the core investors and allow more investments from the general investing public.
In the latest report on public shareholding status in quoted companies obtained by The Nation, the NSE indicated that GNI and 10 other companies were in violation of the listing requirement, which compels companies quoted on the main board of the NSE to ensure that a minimum of 20 per cent of its issued shares is in the hand of the general investing public.
Companies listed on the Exchange are required to maintain a minimum free float for the set standards under which they are listed in order to ensure that there is an orderly and liquid market in their securities. The free float requirement for companies on the main board is 20 per cent while companies on the second board, otherwise known as Alternative Securities Market (ASEM) are required to have 15 per cent free float.