First Bank offers 23 per cent on rights issue

First Bank of Nigeria Plc is offering a rights issue to investors which opens on Monday, May 14, 2007. The offer is coming at 23.3 per cent or N9.40 less than the market price of N40.40.
Chinedu Dike

A total of 1, 624, 253, 238 ordinary shares of 50kobo each is being issued to the investing public by way of offer for subscription at N33.00 per share giving an offer size of N53.6 billion. Also a rights issue of 1, 496, 762, 682 ordinary shares of 50kobo each is also being made to existing shareholders of the bank at N31.00 per share giving an offer size of N43.4 billion. The public offer comes at a discount of N7.40 while the existing shareholders enjoy a discount of N9.40 on the rights issue

Also fresh investments in the bank through the public offer will be made at 18.3 per cent or N7.40 less the current price at the stock market.

Market watchers say this is a very friendly price that the market will readily accept based on the performance history of the bank.

The bank is seeking to raise about N100 billion fresh funds through a hybrid of offer for subscription and rights issue.

All arrangements to the offer were concluded yesterday at a completion board meeting held in Lagos with all parties to the offer putting hands on paper to seal the deal.

According to the bank, the net offer proceeds of N96 billion will be deployed to a number of projects to reposition the bank and boost its working capital.

As contained in the offer prospectus, the proceeds of the offer will be used to widen the bank’s retail infrastructure in Nigeria via the expansion of branch network; strengthen capital base, to support business growth; expand capital resources to exploit value creation opportunities in the regional financial markets.

Specifically, branch expansion will gulp N21.930 billion or 22.8 per cent of the total proceeds, and the projects will be completed over a period of 24 months. Upgrade of branch network will take up N12.225 billion or 12.7 per cent; strategic business development which involves ATM rollout and electronic banking will take up N10.280 billion or 10.7 per cent; increase in equity investment in subsidiaries will gulp N11 billion or 11.5 per cent, while investment in new subsidiaries will take N7.0 billion or 7.3 per cent. The biggest chunk of N27.140 billion or 28.3 per cent will be applied to increase the bank’s working capital, just as N6.425 billion will be used to upgrade information technology infrastructure.

The offer is the highest in the history of the nation’s capital market. Already, opinions are strong that the offer will be over-subscribed given the track record of the bank.

First Bank is currently capitalised at N345.8 billion. This is expected to shot up to N448.7 billion at the conclusion and listing of the new shares.

The bank recorded gross earnings of N51.2 billion for the nine months ended December 31, 2006, compared to the March 31, 2006 full year earnings of N57.4 billion. Profit before tax for the third quarter period stood at N18.8 billion, in contrast to 2006 full year profits of N21.8 billion.

For the 2007 full year ended March 31 2007, the bank is making a forecast of N23.3 billion in pre-tax profits, while after tax profit is projected at N18.3 billion. Shareholders are expected to receive N7.8 billion in cash dividends, translating to a payout rate of 75kobo per share.

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