FBN Holdings Plc, the parent company of Nigeria’s oldest financial institution, First Bank, is currently facing significant hurdles in its attempt to raise N350 billion in fresh capital. This critical fundraising effort, intended to meet the Central Bank of Nigeria’s (CBN) new N500 billion minimum capital requirement for Tier 1 banks, has been delayed due to an ongoing legal battle among the company’s major shareholders. The dispute has also led to the cancellation of the company’s Annual General Meeting (AGM) for the second consecutive year, further complicating its financial and operational strategies.
Legal Tussle: The Shareholder Dispute
The central issue lies in a contentious battle between FBN Holdings and its former Chairman, Oba Otudeko. Otudeko, through his investment vehicle Barbican Capital, claims to be the bank’s largest shareholder, holding a 15.01% stake, which equates to 5.38 billion shares. However, FBN Holdings disputes this claim, asserting that Femi Otedola, with a 9.41% stake, remains the bank’s largest shareholder.
This disagreement has escalated to the Federal High Court in Lagos, which recently issued an order canceling the company’s 12th AGM, initially scheduled for September 3, 2024. This AGM was expected to see shareholders approve the crucial recapitalization exercise, alongside dividend payments and directors’ fees. The cancellation, driven by legal disputes, marks the second year in a row that FBN Holdings’ AGM has been disrupted, raising concerns about the company’s ability to execute its strategic plans.
Impact on Recapitalization Plans
The legal impasse has significant implications for FBN Holdings’ future. The N350 billion capital raise is not just a financial maneuver; it’s a regulatory necessity. With the CBN’s stringent new requirements aimed at strengthening the banking sector, FBN Holdings needs this capital infusion to maintain its Tier 1 status and remain competitive in Nigeria’s dynamic banking environment. Without shareholder approval and the subsequent capital raise, the company could face severe operational challenges, jeopardizing its market position.
Court Proceedings and Arguments
In court, FBN Holdings and the CBN have both sought to dismiss the lawsuit filed by Barbican Capital, arguing that Barbican has not substantiated its claim to the contested shareholding. FBN Holdings revealed that during the CBN’s verification exercise, only 3.11 billion shares (equating to 8.67%) could be confirmed as belonging to Barbican, leaving the remaining 2.34 billion shares (6.52%) unverified.
Barbican Capital, however, contends that it has provided adequate documentation, including a statement from the Central Securities Clearing System Plc (CSCS), which verifies its holding of 5.386 billion shares as of May 23, 2024. Additionally, Barbican claims to have received dividends for all 5.386 billion shares, bolstering its assertion of ownership.
Stakeholder Reactions and Concerns
The ongoing legal battle has alarmed shareholders and industry stakeholders alike. Alhaji Mukhtar Mukhtar, Chairman of the Trusted Shareholders Association of Nigeria, criticized the situation, calling on regulators to safeguard FBN Holdings from what he described as “aggressive moves” that could destabilize the bank. He emphasized the importance of sufficient capital in the banking industry, warning that without it, the institution could face severe risks.
Moses Igbrude, National Coordinator of the Independent Shareholders Association of Nigeria, also expressed dismay at the postponement of the AGM due to legal disputes. He urged major shareholders to resolve their issues amicably and prioritize the bank’s long-term interests over personal conflicts.
Similarly, Bisi Bakare, Chairman of the Pragmatic Shareholders Association of Nigeria, condemned the legal attempt to halt the AGM. He underscored the importance of FBN Holdings as a systemically important financial institution, warning that any disruptions to its operations could have widespread negative effects on the Nigerian economy, potentially leading to significant financial distress and job losses.
As FBN Holdings Plc navigates the legal complexities surrounding its shareholder dispute, the stakes remain high. The delay in raising the much-needed N350 billion capital not only threatens the company’s compliance with regulatory requirements but also poses a risk to its stability in the competitive Nigerian banking sector. With the court set to hear the case on October 2, 2024, all eyes are on the outcome, with stakeholders hoping for a swift resolution that will allow FBN Holdings to secure its financial future and uphold its legacy as a pillar of Nigeria’s financial landscape.
