On Tuesday, 29 September, Access Bank Plc (NSE Ticker: ACCESS) announced that the Bank will be restructuring to a holding company (“HoldCo”). In its corporate release, the Bank said it has received the Central Bank of Nigeria’s Approval-in-Principle.
The proposed HoldCo structure would enable the Bank to further accelerate its objectives around business diversification, improved operational efficiencies, talent retention as well as robust governance.
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ACCESS also announced definitive agreements to bolster its market position in Mozambique and enter the South African market. ACCESS entered the Zambian market with its acquisition of Cavmont Bank.
The bank believes that the transactions will result in a more connected African banking network that builds on ACCESS’s existing foundation and enhances its value proposition to stakeholders, including customers and employees.
“A broader and connected Africa network remains a core strategic focus for geographic earnings growth and diversification, which will further enhance profitability and risk metrics,” the bank said.
Mozambique: ACCESS received regulatory approvals to commence operations in Mozambique under the name Access Bank Mozambique, S.A. Furthermore, the bank announced that its Mozambique subsidiary to acquire African Banking Corporation, from ABC Holdings Limited for cash, in a combination of definitive and contingent consideration.
The transaction will be funded from the capital invested by the Bank in Access Bank Mozambique and will result in the Access Bank Mozambique becoming the 7th largest bank in the country, up from 20th.
South Africa: ACCESS has entered into a definitive agreement with GroCapital Holdings to invest into Grobank Limited in two tranches.
The first is an initial cash consideration for a 49% shareholding, increasing to a majority stake in the second trance.
Speaking on these developments Herbet Wigwe, GMD/CEO Access Bank said:
“We have consistently said that we are focused on building the scale needed to become a leading African bank; one that leverages our experienced and growing talent base and key stakeholder partnerships towards driving sustainable impact and profitability.
“Today’s announcement demonstrates further commitment to delivering our strategic aspirations of becoming Africa’s Gateway to the World in line with our vision to be the World’s most respected African Bank.
“These transactions will significantly strengthen our presence in Southern Africa and further our fo0tprint for growth in the SADC region. With a broader presence across the continent, Access Bank will be better placed to support our customers who are increasingly looking towards intra Africa growth.
“The proposed transactions will accelerate the Bank’s momentum towards delivering world class banking services to an expanded customer base across Africa. Our goal remains to reach and impact 100 million unique customers across the continent.”
A holding company
A holding company, sometimes referred to as the Umbrella or Parent company, is a type of financial organization that owns a controlling interest in other companies, which are called subsidiaries.
The parent corporation can control the subsidiary’s policies and oversee management decisions but doesn’t run day-to-day operations of the subsidiaries.
Holding companies are protected from losses accrued by subsidiaries, for instance if a subsidiary goes bankrupt, the creditors of the subsidiary cannot legally go after the holding company. Thus the holding company will only suffer capital gain loss or decline net worth.
The financial and legal liability exposure of a holding company is limited.
The overall tax liability of the company can be reduced by basing parts of the business in jurisdictions with low tax rate.