Access Bank Plc, has solidified its presence in the East African banking sector by securing a N3.3 billion ($2 million) gain from its acquisition of African Banking Corporation Tanzania (ABCT) Ltd. The acquisition, completed on May 31, 2024, was structured through a three-year deferred payment plan.
Financial Gains from Bargain Acquisition
In its latest interim financial report for the six months ending June 30, 2024, Access Bank revealed that it would pay N23.3 billion ($14.16 million) for a 97% stake in ABCT. This acquisition was completed at a significantly lower price than the fair value of ABCT’s net assets, which stood at N26.6 billion ($16.17 million). The N3.3 billion ($2 million) difference represents a “bargain purchase,” highlighting Access Bank’s strategic foresight and its ability to capitalize on favorable opportunities.
“The Group acquired 97 per cent of the share capital of African Banking Corporation (Tanzania) Ltd on May 31, 2024,” Access Bank stated in its disclosures. “The fair value of the consideration and net assets at acquisition were N23.3 billion and N26.6 billion respectively, resulting in a provisional gain (bargain purchase) of N3.3 billion.”
The deal also included a deferred payment arrangement, allowing Access Bank to settle the acquisition cost over three years without accruing interest.
What is a Bargain Purchase?
A bargain purchase occurs when a company acquires another at a price below its fair market value. This is often possible when the target company is in financial distress or undergoing a restructuring process. In this case, Access Bank’s acquisition of ABCT at a favorable price reflects its keen ability to identify lucrative investments and enhance its portfolio in emerging markets.
A Special-Purpose Acquisition: Expanding in Africa
Access Bank’s expansion into Tanzania is part of its broader strategy to strengthen its Pan-African footprint. The acquisition of ABCT was first announced on July 14, 2023. ABCT is a subsidiary of Atlas Mara Ltd (ATMA), a London-listed, Africa-focused special-purpose acquisition company with investments in banks across the continent.
In addition to the Tanzanian acquisition, Access Bank had earlier completed the acquisition of African Banking Corporation Zambia Ltd on January 5, 2024. This acquisition, completed through its subsidiary, Access Bank Zambia Ltd, further underscores the bank’s aggressive expansion plans within the region.
Poised to Deliver Innovative Banking Solutions
Access Bank’s entry into the Tanzanian market is not just a geographical expansion; it represents a key component of its long-term vision to become the “World’s Most Respected African Bank.” By strategically positioning itself in key African markets, Access Bank is now poised to offer a robust range of innovative banking solutions to both retail and corporate clients across the continent.
As the bank continues to grow, its focus on leveraging such acquisitions demonstrates a commitment to advancing financial inclusion and offering cutting-edge financial products, reinforcing its reputation as a top-tier player in the African banking industry.
Source: East Africa