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In Defense of Union Bank on Titan Trust Acquisition And Lessons from Aliko Dangote



Union Bank and Titan Trust Bank

By Ndubuisi Ekekwe (PhD)

I have read many articles on the acquisition of Union Bank Nigeria by Titan Trust Bank. Many of the hypotheses have focused on digital Darwinism of the century-old bank, chronicling how young people are not patronizing the bank, giving it an imperiled future. The remedy postulated by the authors is this: adapt or you will die like Union Bank.

But today, the lender has put a notice: “Titan Trust Bank Limited (TTB) has become the majority shareholder in Union Bank of Nigeria Plc. This followed an agreement by Union Global Partners Limited, Atlas Mara Limited and other majority shareholders to divest 88.39 per cent shareholding in Union Bank to TTB….subject to regulatory approvals and other financial conditions, would upon completion transfer 89.39 percent of Union Bank’s issued share capital to TTB.”

For academic purposes and since we’re not in session in Tekedia Mini-MBA, I will present an alternative way to look at this deal. Typically, I would have scheduled a Zoom session for our members so that we can have a synchronous conversation so that at the end, everyone learns. We can still do that in Feb when we resume.

Here is what I want to posit: what happened to Union Bank was not majorly because the bank was not performing well. Simply, even if the bank was performing at 4x its current numbers and its major shareholders decide to exit, they could have still gone ahead. Sure, great numbers would have made the acquisition very expensive, diminishing interests from bargain hunters.

The real issue is this: Union Bank has lost control of itself when it had more than 51% of its shares out there. That three of its shareholders banded together and sold to a 4th investor, giving it super-majority, is part of market systems. If you do not want that, never allow 51% to be floating as those external players can team together and change the equation.

Union Bank’s only option was bidding higher than Titan Trust Bank on whatever those investors were asking for. In other words, Union Bank would be expected to buy itself back by paying investors who held its shares. Unfortunately for the bank, it does not have the funds to do that. Afterall, it sold part of itself to get money from those investors to start with!

That those investors sold to Titan Trust Bank, and from rumors, at a great premium to what the bank was trading at the stock exchange, is actually a great confidence in the bank’s operations. This is not similar to what happened to Blockbuster and Nokia which faded due to massive disruptions from new innovators. This is simply that some investors wanted to exit because one of them needed money badly to pay down maturing debts, and they looked for someone with cash to bail them out.

Union Bank is to a large extent a bystander. But since this is banking where anyone with at least 10% control cannot be hidden, it was looped in as those shares moved hands. So, the bank just watched as the deals were concluded, and at the end, a very small bank swallowed it. Titan Bank has a balance sheet of N136.3 billion while Union Bank is at N2.56 trillion, more than 18x larger.

In the United States where markets allow different classes of shares which make it possible for someone to own 25% of a company and still control up to 70% of its voting rights, this might not be possible, assuming someone holding the special shares is on Union Bank side.

That US structure is the reason no one can remove Mark Zuckerberg  who who owns about 13% (down from 28% at IPO) of Meta (yes, Facebook)  via different classes of shares but still controls 60% of the votes. Nigeria law does not allow that type of structure; we’re largely 1-by-1 which means 1% ownership delivers 1% voting right in the company.

So, how do you avoid what happened to Union Bank? Follow the playbook of Aliko Dangote: never make more than 50% available for the public. With that, even if all the hunters and vultures gather, they will still be short of the majority! Dangote controls about 85% of Dangote Cement’s available shares and what that means is this: even if all you thousands team together, you can only get to 15%, and that means he remains the Oga.

Of course Union Bank could have avoided the acquisition but for those government bailouts from Central Bank of Nigeria and AMCOM which forced the bank to raise capital, and in the process created the super-holders. But that old Union Bank is different from the current one. The problem though is that the current leadership cannot change the structure because they do not have the funds. Of course, it was the bank that put itself into the old position to start it: creative destruction, people.

CREDIT: Ndubuisi Ekekwe, PhD, Chairman of FASMICRO Group, is the Lead Faculty in Tekedia Mini-MBA. He writes regularly in the Harvard Business Review. Email:

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