On Access Holdings’ decision to acquire First Guarantee Pension

Finance

As Access Holdings Plc prepares to complete its acquisition of First Guarantee Pension Limited, Festus Akanbi argues that instead of acting as a stumbling block to the acquisition, FGPL stakeholders should accept the trade deal that promises to stabilize the company in the new capital exemption for pension firms

One of the hottest issues in business and economics commentator circles last week was the unnecessary controversy that followed the planned acquisition of FBN Holdings’ pension subsidiary, First Guarantee Pension Limited ( FGPL), by Access Holding Plc.

THISDAY understands that the controversy is fueled by the action of some FGPL shareholders who oppose the deal due to the suspicion that the acquisition of the pension company did not follow due process.

Recently, Access Holdings Plc, the parent company of Access Bank Plc, announced its intention to acquire a majority stake in FGPL.

This transaction, according to Access Holding, is key in the group’s plan to evolve from a narrow banking business into a financial services holding company positioned to gain relevant scale across Africa, global currency centers and “across the globe.” beyond banking verticals.

To initiate this process, Access Holdings agreed to acquire First Guarantee Pension Limited after selling its pension business, Access Pension Fund Custodian Limited, to First Bank of Nigeria Holdings.

It is well known that First Guarantee Pension Limited was a struggling company with a management crisis, which saw the National Pensions Commission (PenCom) sack management in 2011 and retain its authority for over five years.

Reports said Pencom had taken control of the company and installed interim management during the crisis, citing “relentless shareholder wrangling and several adverse corporate governance issues in the PFA.”

This is why some investment analysts have been surprised by the current combative posture of some of the company’s shareholders who are crying foul over the proposed acquisition of the company.

For this school of thought, the decision of Access Holdings to buy FGPL is supposed to have benefited from the support of shareholders whose disputes had threatened the survival of the company in 2011.

The contemplated acquisition

Under the current exemption, Access Holdings sold Access Pension Fund to First Bank Holdings, solely for its parent company, Access Holdings, to acquire First Guarantee Pension, whose pension funds for RSA accounts are held by First Pension Custodian, a wholly owned subsidiary of First Bank Holdings.

The holding company, in a notice to its stakeholders, said PenCom and the Central Bank of Nigeria (CBN) had given their “no objection” to the transaction, the completion of which is subject to receipt of all required regulatory approvals. .

Group Managing Director, Access Holdings, Mr. Herbert Wigwe, described the planned takeover of FGPL as part of the organization’s strategy to transform the financial services landscape in Africa.

“This transaction is a natural evolution for us. Over the past 20 years, we have set our goals and implemented ambitious plans to transform the African financial services landscape with a focus on banking and have created Africa’s first and largest bank by customer base.

“This large customer base in both wholesale and retail segments makes the retirement business a natural fit for the company given its focus on optimizing the ecosystem.”

“We will leverage our well-established culture of strong corporate governance, risk management, advanced technology and digital capabilities to deliver high standards of professionalism in the management of pension assets for the benefit of our stakeholders” , he added.

He added that PenCom and the CBN have given their “no objection” to the transaction, the completion of which is subject to receipt of all required regulatory approvals.

The company, he stressed, will update the market as appropriate and meet its disclosure obligations.

The agreement relates to a proposed purchase by First Pensions of the entire share capital of Access Pension Fund Custodian Limited held by Access Bank Plc.

Market analysts, however, said the takeover bid has become imperative for both parties, in line with recapitalization efforts by pension fund administrators (PFAs) to meet the minimum benchmark capital set by regulator, PenCom. .

They explained that given the new threshold for the capital base of pension companies in the country, there was no way for FGPL to compete favorably without additional capital which they believe is guaranteed by the buyout of ‘Access Holdings.

New capitalization

PenCom in April last year announced an increase in the minimum share capital of pension fund trustees from the current level of N1 billion to N5 billion. It gave operators 12 months to comply with the new capital regime (from April 27, 2021 to April 27, 2022). The exercise has become timely as the value of pension fund assets under management and custody grew exponentially by 244%, from N3 trillion in 2012 (when the previous recapitalization was carried out) to N12,290. billion naira (as of December 31, 2020).

Official statistics from the commission show that prior to the declaration, around four companies had already exceeded the new capital margin while currently, as many as seven of the existing 22 companies have exceeded the new group minimum share capital.

Last month, PenCom announced the conclusion of the recapitalization exercise with 20 PFAs having met the requirement.

The commission said it was pleased to inform all stakeholders and the general public that as of 27 April 2022, all pension fund administrators (PFAS) have complied with the Commission’s directive for the increase minimum regulatory capital (shareholders funds) of N1 billion. to 5 billion naira.

The fear of shareholders

However, the complaint from FGPL shareholders was the alleged failure of the management of the pension company to comply with the law which stipulates that a legal notice of 28 days for an Extraordinary General Meeting (AGE) must be observed.

They alleged that the company’s management failed to comply with this regulation, an issue that would fuel their allegation of a back-door deal.

The matter is said to be subject to litigation as some of the shareholders have taken legal action to enforce their pre-emption rights as enshrined in the Companies and Related Matters Act 2020 (CAMA).

On the side of these aggrieved shareholders is a Lagos-based business lawyer, Chuks Nwachuku, who has alleged that Access Holdings Ltd’s moves to acquire majority shares of First Guarantee Pensions Limited remain illegal.

However, PenCom, which oversees the operations of pension companies in the country, saw no foul play in the proposed acquisition.

PenCom Corporate Communications Manager Mr. Abdulkadir Dahir was recently quoted by an online news platform as saying that for the commission to approve the acquisition of FGPL, it means the company has met all requirements.

According to him, “all the conditions must have been met for the commission to give the green light. If you know how the commission works, PenCom does not look anyone in the face, we follow the rules and guidelines.

“For us to approve, it presupposes that all the requirements set by law have been met,” Dahir said.

M&A Season

In line with the new capital requirement, PenCom has approved mergers and acquisitions that will likely reduce the number of pension fund administrators (PFAs) in operation. It has already approved the acquisition of AXA Mansard Pensions Limited by Eustacia Limited and the renaming of AXA Mansard Pensions Limited to Tangerine Pensions Limited.

In addition, the commission granted a “no objection” to the merger between Tangerine Pensions Limited and Apt Pension Funds Managers Limited.

FCMB Pensions Limited, one of the subsidiaries of First City Monument Bank Group Plc, has acquired a 60% stake in AIICO Pension Managers Limited.

The Contributory Pension Scheme (CPS or “the Scheme”) in Nigeria was established by the Pension Reform Act (PRA) 2004 and amended in 2014. The CPS outsources the management of the pension fund to private organizations known as AFP. The 2014 PRA introduced a tripartite system with the aim of minimizing the possibility of misappropriation of pension funds by establishing three autonomous actors; the regulator, the administrator and the depositary.

The Nigerian pensions industry has grown significantly with over 9.5 million contributors, with a pension penetration rate of 14% as of December 2021. Assets under management in the industry have grown significantly to reach 13.42 trillion naira in December 2021 from 12 naira. 30 trillion and 13 trillion naira recorded in December 2020 and September 2021 respectively. This growth is mainly due to pension contributions received and the market valuation of Federal Government of Nigeria (FGN) bonds and equities.

It is hoped that the shareholders and other stakeholders of First Guarantee Pension Limited will allow the pending acquisition of the company by Access Holding Company to grow to remain relevant in the scheme of things in the Nigerian pensions industry.