Union-Titan deal, the acquisition of Union Bank of Nigeria by TGI Group, parent of Titan Trust Bank, has now been completed: “In the spirit of the change of ownership, ten of the thirteen members of Union Bank’s board have exited the bank…”
There is a big lesson here and we will be discussing this in Tekedia Mini-MBA Live session. I have written extensively that this acquisition was intriguing since Union Bank was actually doing just “fine”. The biggest challenge 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 supermajority, 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.” But it did not have the money, making the management bystanders in the whole deal! Nigeria does not allow different classes of shares where you can own say 20% and control 90% of the voting power like they do in companies like Meta (Facebook) and Alphabet (Google).
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The only solution is to follow Aliko Dangote’s formula: never list more than 49%. 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 boss. Of course, Dangote Cement was not established in 1917 with the heritage of the former Barclays Bank branch which evolved to become a leading Nigerian bank. So, for Dangote Cement, time will tell if the 85-15 model can last.
In Sun Tzu’s The Art of War, this is called flanking attack; we’re used to frontal attack. Union Bank’s liquidity position was its weakest point, making its executives bystanders as the ownership changed hands!
In Defense of Union Bank On Titan Trust Acquisition And Lessons from Aliko Dangote
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Any special benefits, intrinsic or extrinsic for keeping Union Bank? It’s not like young people are queuing up to bank with it, that says a lot about its future. Maybe a change of name could help.