FT: Bob Diamond to sell major stake in Atlas Mara to Canadian insurer Fairfax

[dr.malone]

Fairfax to take at least 30% share in vehicle created to target African banks

 

Bob Diamond has agreed to sell more than a third of Atlas Mara, the vehicle he created to invest in African banks, to the Canadian life insurer Fairfax Financial at an 80 per cent discount to its 2013 listing price.

 

The deal, which will partly fund Atlas Mara’s investment in a Nigerian bank, leaves existing investors in the London-listed vehicle facing painful dilution, including Janus Capital, Wellington Management, Guggenheim and Mr Diamond himself.

 

Atlas said on Tuesday that it intends to raise $100m through an offering of new shares, which will be sold at $2.25 — a 10 per cent discount to Tuesday’s closing price — and a further $100m through the issuance of a mandatory convertible bond to Fairfax.

 

Fairfax, which is run by Canadian investor Prem Watsa, will also have the right to secure a minimum of 30 per cent of the share offering, and will subscribe for any shares not taken up by existing shareholders.

 

The Canadian group is expected to have a total shareholding of at least 35 per cent of Atlas Mara after the deals are completed, and will nominate four directors to its nine-strong board.

 

The deal will make Fairfax Africa, a new Africa-focused fund set up by the Canadian insurer, the biggest shareholder in Atlas Mara.

 

Atlas Mara will use some of the money to increase its holding in Union Bank of Nigeria. It intends to pay $55m for an indirect 13.4 per cent shareholding in UBN, taking its combined direct and indirect holdings in the bank to 44.5 per cent.

 

The new share offering comes shortly after Atlas Mara was forced to raise extra funds in an overnight placing in February. The vehicle has had a difficult year, which also saw the departure of its chief executive, a drop in profits and the announcement of a big reorganisation and cost-cutting programme.

 

However, Mr Diamond, the former Barclays’ chief executive who chairs the group, is aiming to double Atlas Mara’s earnings in the coming year.

 

“Our board is thrilled to announce this important series of transactions,” said Mr Diamond. “We have a terrific new partner in Fairfax Africa — a strategic investor and partner who brings permanent capital and a shared vision of the banking opportunities in sub-Saharan Africa.”

 

Aiming to create the first pan-African banking group based on new technologies, Atlas Mara has acquired interests in seven sub-Saharan countries, including Nigeria, Botswana, Zimbabwe, Mozambique, Rwanda, Tanzania and Zambia.

 

Its shares, which have fallen from more than $12, closed up slightly at $2.55 on Wednesday.

[Ballinvarosig Investors]

Wow. I did not expect this. You can buy Atlas Mara on the London Stock Exchange - https://www.google.co.uk/finance?q=LON%3AATMA

 

I own a small shareholding in this company, not because I think it's a good company (it's not) but as a part of a basket of stocks that trade well below tangible book value. Management have been useless (look at the cost/income ratio), strategy has been bizarre and uncoordinated (buying up stakes in lots of African banks) and the dilution below tangible book is destroying existing shareholders. Fairfax putting money into become the largest shareholder is both good and bad. Good because the extra capital will allow the bank to scale up and distribute costs better, bad because it's yet more dilution below tangible book. I will say that recent quarter results were much better and now with Fairfax getting involved, I think they will maintain the pressure to keep the improvement going, so I am inclined to hold on here, and maybe even add a little.