*Controversy Galore as Otudeko Displaces
Otedola in Comeback Bid at First Bank*
The logo of Nigeria’s First Bank Plc is the image of an elephant in mid-stride. This image is meant to portray size, strength, action, a legacy of trustworthiness, and institutional pedigree – the very attributes you want to associate with your bank, right? Of late, however, events in and around the First Bank financial ecosystem have given the elephant logo an added – and not-so-palatable – connotation.
We all know what happens when two elephants fight – or rather, when two elephants have a Rumble in the Jungle (to borrow Muhammad Ali’s famous phrase in the run-up to his 1974 clash with George Foreman in Zaire, as today’s Democratic Republic of Congo was then called). The proberbial grass suffers.
It is yet to be seen what, or who – if anyone – will suffer in the fallout of what can be regarded as a Rumble in the (Financial) Jungle, as two of Nigeria’s most prominent billionaire business tycoons face off in a battle over control of First Bank of Nigeria Holdings Plc., one of Africa’s most diversified financial services groups and the parent company of the country’s most venerable financial institution, First Bank of Nigeria Plc., following the recent purchase by Chief Obafemi (better known as Oba) Otudeko, the chairman of the Nigerian conglomerate, Honeywell Group, of about 4.7 billion shares in the financial giant. It is said that this latest purchase (made via the Barbican Capital Limited, an affiliate of the Honeywell Group) now takes Otudeko’s shareholding stake in the First Bank Holdings Group to 13.3 per cent of the bank’s outstanding market value – making him the single-largest shareholder in the conglomerate and putting him ahead of the previous leader, Mr. Femi Otedola, chairman of Geregu Power (who now controls 9 percent of shares) and Globacom boss, Dr. Mike Adenuga (who now has a 7 percent share holding, same as Mr. Hassan Odukale). If we are to add that 13.3% to the previously disclosed interests held by Honeywell Group Limited’s affiliates – amounting to about 1.5% – this will bring Otudeko’s aggregate shareholding in the FBNH Group to about 15% – although this raises the question as to whether there are OTHER shares being held by nominee or trustee accounts that are yet to be declared by the Honeywell Group or its affiliates. More on this later.
Reports also say that the 4.7 billion shares, which were bought at N19 per unit on July 7, 2023, are the largest volume of First Bank shares traded in a single day since 2012, when the stock exchange began publishing relevant data. Factors driving the Nigerian money market at present, such as the pressure to ‘Buy, Buy, Buy!’ and the current currency revamp policies being pursued by the administration of Pres. Bola Ahmed Tinubu, have catapulted the FBNH stock’s valuation to its peak level ever, with its market capitalisation now at about N728.7 billion, making it Nigeria’s fourth-biggest lender by market value. Only Zenith Bank, Guaranty Trust Holding Company and Stanbic IBTC Holdings Company exceed the FNBH group’s valuation.
While it is true that First Bank of Nigeria Holdings Plc duly acknowledged Honeywell Group Limited’s acquisitions (thereby conferring de facto legitimacy on the transaction), it must be said that the circumstances that led to it are far from straightforward – given that the memories of Otudeko’s departure from the leadership of First Bank under a cloud of controversy (while serving as Chairman of the Board until 2021, during his earlier stint as the bank’s single largest shareholder) are still fresh.
Apart from what analysts described as the ‘highly questionable’ insider loans he had taken from the bank – which were said to have exceeded regulatory limits for shareholders and directors – Chief Otudeko’s recent moves have been likened to a case of ‘robbing Peter to pay Paul.’ It will also be recalled that in May 2022, he had sold a number of Honeywell’s shares, worth N22 billion, ostensibly to repay a long-standing debt to the same First Bank Nigeria Holding Plc.!
In fact, among the reasons the CBN leadership gave for the dismissal of the Otudeko-led Board back in 2021 was that the bank had been under ‘regulatory forbearance’ since 2016 – arising from bad credit decisions, inadequate corporate governance and – most ominously – a high non-performing loan (NPL) ratio and capital adequacy ratio that had breached acceptable prudential standards for an institution the size of First Bank. Between 2016 and 2020, the CBN said then, First Bank had recorded a total loan impairment of over N565 billion, and as of the financial year ending December 31, 2022, total loan impairment charges had risen to N1.2 trillion! The CBN and market analysts called it ‘a massive erosion of wealth.’
Strong words indeed.
This unflattering perception, coupled with Chief Otudeko’s aforementioned removal as First Bank Chairman, was given some credence, however tenuous, by a protracted dispute he has had with another financial institution – EcoBank Nigeria Limited – over an alleged loan. Recall that on January 27 this year, the Supreme Court upheld an earlier judgment of the Court of Appeal against Honeywell Flour and the two companies in dispute with Ecobank over the said loan. This follows the latest move by Ecobank in pursuing the takeover of the FBNH shares due to Otudeko’s indebtedness to Ecobank – which the bank says run up to over N13.5 billion.
In 2017, Ecobank filed several lawsuits against Otudeko and his companies, including Honeywell Group Limited, Siloam Global Services Limited, Anchorage Leisures Limited, and Honeywell Flour Mills, at the Federal High Court in Lagos – actions aimed, it said, at recovering these affiliated companies’ debts to the bank (which Otudeko was said to have personally guaranteed).
In spite of Otudeko and his companies disputing those figures – and indeed the general merits of Ecobank’s claim – the Supreme Court affirmed their indebtedness in its January ruling. A recent letter from Ecobank’s legal representative to the CEO of FBN Holdings, is now accusing Otudeko of ‘intentionally’ diverting his and his debtor companies’ assets to evade debt payment, in defiance of the Supreme Court’s directive. The letter claims that, instead of repaying the outstanding debts, Otudeko took actions to divert his assets and funds through the creation of the Barbican Capital Limited – which the letter referred to as no more than ‘a special purpose vehicle.’
In view of this, Ecobank has – since the Supreme Court January ruling – filed bankruptcy proceedings against Chief Otudeko at the Federal High Court in Lagos, urging FBN Holdings to withdraw its purported acknowledgement of the shares in contention as belonging to Otudeko, and to NOT take any action which may be tantamount and/or construed to be encouraging the subversion and/or violation of the extant Supreme Court judgment mandating the Honeywell companies to pay their outstanding indebtedness to Ecobank Nigeria Limited – as doing so, it says, would violate the Supreme Court’s judgment.
In response to Ecobank’s action and the respective response of both the market in general (and other significant shareholders of FBNH in particular) to Otudeko’s acquisition, the Securities and Exchange Council has now announced an impending investigation into the deal.
What about Otedola’s response? What will his next move be? While Otudeko’s stunning comeback move clearly caught him off-guard, the various reactions to it – the second look, the impending investigations by regulators such as the CBN and the SEC, and the legal challenges the latter’s acquisition has attracted from the likes of Ecobank – are bound to give him some hope, however tenuous, of reclaiming his lost mantle. By the estimation of those who know him well, Otedola hardly ever loses out in anything he sets out to achieve. Never one to play second fiddle, he appears to have considerable time on his hand to plot his own comeback. Anyone who wants to bet against Femi, say his friends and associates, does so at his own peril.
Otedola may have taken his prime position at the FBN Holdings for granted until now, but given the threat he now faces, it seems he is about to go into overdrive to consolidate his control of the FBNH Group. Already, there are rumours (as yet unsubstantiated at the time of this writing) that a number of significant shareholders with a combined interest of about 28% in the organization, intend to join forces to block Otudeko from regaining control of the company in ANY capacity whatsoever. Hence the aforementioned meeting of shareholders, some of whom are said to be filled with apprehension as to what would happen to their individual and corporate interests in the Holding Company in the afternath of Otudeko’s return to the top of its totem pole – given the unceremonious and rather acrimonious nature of his 2021 departure from his perch as Chairman.
Since Chief Oba Otudeko, for his part, is not going to take any of the recent developments in reaction to his acquisition lying down, it promises to be a Rumble in the (Financial) Jungle. He will be expected to milk all his options down to the last drop. For example, he must be keenly aware that even now, with the chips still up in the air, he is well within his rights to have representation, not only in the Holding Company, but also on its subsidiaries, and to ensure that his proxies can speak for his investment in the Group – as is, of course, the case with other significant shareholders.
Besides that, they have much to think about, these significant stakeholders. For one, the reason (or reasons) for the regulatory forbearance granted FBN Holding Company, which in effect keeps the Company under the regularory toehold of the Central Bank (as obtained during the reign of the Otudeko-led Board) no longer exists, because virtually all the key performance indices such as its NPL profile and capital adequacy ratios have met stipulated prudential requirements – thanks to the remedial actions later taken by the Otedola-led regime. And from every indication, these other major stakeholders would want these encouraging KPIs to continue to improve. Which means if that they know what is good for them as they gird their loins for a high-stakes ‘Game of Thrones,’ a reprieve from the regulatory overreach of the CBN would be a key priority – rather than a consolidation of same, which is probably what the Otudeko comeback would bring (especially now that the now-thoroughly discredited Emefiele is no longer in the picture).
Another priority for these shareholders (which perhaps should go without saying – except that this is Nigeria where anything is possible, however absurd or outlandish, and people are sometimes so blinded by short-term interest and promises of immediate gratification that they lose sight of the bigger picture) should be for them to come together and work in the interest of the financial services group, for retail and institutional investors, as well for as other stakeholders, rather than tearing each other apart and eroding confidence in the company that they all have so much of a stake in. A public spectacle right now will only reinforce speculations – especially among depositors – that the Group’s top echelon are more interested in their pecuniary interests and how they can use the Holding Company as their personal piggy bank, rather than an institution that creates value for them and the society at large. Right now, their collective goal should be how to grow back the FBN Holding Company stock – which in recent years has lagged behind its Tier 1 competitors.
At a time when it appears to have turned the corner, it must not be derailed from its transformation journey to become Truly the First – as its ad payoff proudly proclaims. Common sense – and the relative track records of the apparent combatants for pole position at the Holding Company – should indicate in whose hands (Otedola’s or Otudeko’s) the profile and fortunes of the financial services group, as well as its core values and the perception of integrity, strength and timeless values it has nurtured through the decades and through the various cycles of evolution it has undergone in that time, are better guaranteed.
Make no mistake: the outcome of this Game of Thrones, this Rumble in the Boardroom Jungle, will determine whether the elephant in the First Bank logo retains its traditional, reassuring image in the public imagination – or whether it will become the proverbial bull – sorry, elephant – in a china shop.