Tuesday, December 12, 2006

Denied: Ghana Blocks Cal Bank Takeover Bid

There was drama on the floor of the Ghana Stock Exchange last week. Nigeria’s First City Monument Bank (FCMB) attempted a hostile takeover of Cal Bank, one of Ghana’s largest financial institutions.

It all began on November 30, when the Commonwealth Development Corporation sold its 8% stake in the bank to an unknown buyer. Soon thereafter, it appeared that the International Finance Corporation (IFC) and Prince Alwaleed of Saudi Arabia would also unload their shares – totaling an additional 29% of the bank.

Cal Bank’s management worked quickly to block the deal, apparently with the aid of the Central Bank of Ghana, which claimed that regulatory approval had not been given to the transaction.

The Central Bank’s intervention troubled ThinkGhana, a public policy organization. The group released a statement saying that the Bank did not have the authority to void the deal, as it was the domain of the SEC. They further cautioned that the Bank’s actions could inhibit foreign investors’ participation in the market.

A spokesperson for the SEC reported that the deal was in contravention of regulations. Unfortunately, I have not been able to determine what these regulations are specifically. It does however appear that this case could have a chilling effect on foreign investment on the GSE.

The events are also an indication of the level of competition in the Nigerian banking sector. Big banks have not only been forced to gobble up their domestic competitors, but they are looking to snap up assets outside the country too.



Anonymous said...

It is this misplaced nationalism that creates avenues for corruption & impedes growth.

The most successful "small" bank worked because they innovated not because of "protection".

Grameen Bank of Bangladesh is a resounding success. In Kenya, Equity Bank has done great.

Let these takeovers go on, they will create stronger competitors.

Ryan Shen-Hoover said...

It's reported that since Nigerian institutions entered the Ghanaian banking sector, interest rates have been reduced nearly in half.


I would never go near a bank stock.