On Access Holdings’ Move to Acquire First Guarantee Pension

Finance

As Access Holdings Plc moves to finalise its acquisition of First Guarantee Pension Limited, Festus Akanbi argues that rather than acting as a stumbling block to the acquisition, stakeholders in FGPL should embrace the business deal which promises to stabilise the firm in the new capital dispensation for pension firms 

Oe of the most topical issues in the circles of business and economic affairs commentators last week was the needless controversy trailing the planned acquisition of FBN Holdings’ pension subsidiary, First Guarantee Pension Limited (FGPL), by Access Holding Plc.

THISDAY gathered that the controversy is being fuelled by the action of some shareholders of FGPL who are opposed to the deal over the suspicion that the acquisition of the pension firm was not following due process. 

Recently, Access Holdings Plc, the parent company of Access Bank Plc announced plans to acquire a majority equity stake in FGPL.

This transaction, according to Access Holding, is pivotal in the Group’s plan to evolve from a narrow banking business to a financial service holding company positioned to gain relevant scale across Africa, global monetary centres, and “beyond-banking verticals”.

To kick off this process, Access Holdings agreed to acquire First Guarantee Pension Limited after selling its pension business, Access Pension Fund Custodian Limited, to First Bank of Nigeria Holdings.

It is on record that First Guarantee Pension Limited had been a troubled company with a management crisis, that saw the National Pension Commission (PenCom) sack the management in 2011, and maintain authority for over five years.

According to reports, Pencom had taken control of the company, and installed interim management during the crisis, citing “incessant shareholders squabbles and several issues of adverse corporate governance in the PFA.”

This is why some investment analysts were taken aback by the current combative posture of some of the company’s shareholders who are crying foul over the planned acquisition of the firm.

To this school of thought, the decision of Access Holdings to buy FGPL is supposed to have enjoyed the support of shareholders whose squabbles had threatened the survival of the company in 2011.

The Planned Acquisition

In the current dispensation, Access Holdings sold Access Pension Fund to First Bank Holdings, only for its parent company, Access Holdings, to acquire First Guarantee Pension, whose pension funds for RSA accounts are held by First Pension Custodian, a wholly-owned subsidiary of First Bank Holdings.

The holding company, in a notice to its stakeholders, said  PenCom and the Central Bank of Nigeria (CBN) had given their “no objection” to the transaction, the completion of which is subject to the receipt of all required regulatory approval.

Group Chief Executive Officer, Access Holdings, Mr Herbert Wigwe, described the planned takeover of FGPL as part of the organisation’s strategy to transform the African financial services landscape. 

“This transaction is a natural evolution for us. Over the last 20 years, we set our sights on and delivered ambitious plans to transform the African financial services landscape focusing on banking and have created the African leading bank and the largest bank by customer base.

“This large customer base both on the wholesale and retail segments makes the pension business a natural fit for the corporation given its objective of ecosystem optimisation.”

“We will leverage our well-established culture of strong corporate governance, risk management, cutting-edge technology, and digital capabilities to deliver high standards of professionalism in the management of pension assets to the benefit of our stakeholders,” he added.

He stated further that PenCom and the CBN have given their ‘no objection’ to the transaction, the completion of which is subject to the receipt of all required regulatory approvals.

The corporation, he pointed out, will update the market as appropriate and follow its disclosure obligations.

The agreement is regarding a proposed purchase by First Pensions of the entire share capital of Access Pension Fund Custodian Limited held by Access Bank Plc.

Market analysts however said the takeover bid became imperative for both parties in line with the recapitalisation efforts by Pension Fund Administrators (PFAs) to meet the minimum capital benchmark set by the regulator, PenCom.

They explained that given the new threshold in the capital base of pension firms in the country, there was no way FGPL could compete favourably without additional capital which they maintained is guaranteed by the Access Holdings takeover.

New Capitalisation

PenCom in April last year announced an increase in the minimum share capital of pension fund administrators from the present level of N1 billion to N5 billion. It gave the operators 12 months to meet the new capital regime (from 27 April 2021 to 27 April 2022). The exercise became expedient as the value of pension fund assets under management and custody had grown exponentially by 244 per cent, from N3 trillion in 2012 (when the previous recapitalisation was done) to N12.29 trillion (as of December 31, 2020).

Official statistics from the commission show that before the pronouncement, about four firms had already surpassed the new capital margin while currently, no less than seven out of the existing 22 firms have surpassed the new minimum share capital huddle.

Last month, PenCom announced the conclusion of the recapitalisation exercise with 20 PFAs having complied with the requirement.

The commission said it was pleased to inform all stakeholders and the general public that as of 27 April 2022, all Pension Fund Administrators (PFAS) have complied with the Commission’s directive for the increase of the Minimum Regulatory Capital (Shareholders’ Fund) from N1 billion to N5 billion.

Shareholders’ Fear

However, the grouse of shareholders of FGPL was the alleged failure of the management of the pension firm to comply with the law that stipulates that a statutory 28 days notice for an Extraordinary General Meeting (EGM) must be observed.

They alleged that the management of the company did not respect this regulation, an issue which is said to be fuelling their allegation of an underhand deal.

The matter is said to be a subject of litigation as some of the shareholders have reportedly gone to court to enforce their Pre-emptive Rights as enshrined in the Company and Allied Matters Act (CAMA) 2020.

On the side of these aggrieved shareholders is a Lagos-based business lawyer, Chuks Nwachuku, who alleged that moves by Access Holdings Ltd to acquire controlling shares of First Guarantee Pensions Limited remain illegal.

However, PenCom which supervises the operations of pension firms in the country did not see any foul play in the planned acquisition.

Head of Corporate Communications, PenCom, Mr Abdulkadir Dahir, was recently quoted by an online news platform as saying that for the commission to approve the acquisition of FGPL, it means the company met all requirements.

According to him, “All the conditions must have been met before the commission gives a go-ahead. If you are conversant with how the commission works, PenCom does not look at anybody’s face, we follow the rules and guidelines.

“For us to have approved, it presupposes that all the requirements that are laid down by the law have been met,” Dahir was quoted as saying.

Season of Mergers and Acquisitions

In line with the new capital requirement, PenCom has approved mergers and acquisitions that will likely bring down the number of operating pension fund administrations (PFAs). Already, it has approved the acquisition of AXA Mansard Pensions Limited by Eustacia Limited, and the change of name from AXA Mansard Pensions Limited to Tangerine Pensions Limited.

In addition, the commission granted “No Objection” for the merger between Tangerine Pensions Limited and Apt Pension Funds Managers Limited.

FCMB Pensions Limited, one of the subsidiaries of the First City Monument Bank Group Plc acquired a 60 per cent stake in AIICO Pension Managers Limited.

The Contributory Pension Scheme (CPS or “the Scheme”) regime in Nigeria was established by the Pension Reform Act (PRA) 2004 and amended in 2014. The CPS puts the management of the pension fund in the hands of private organisations called PFAs. The PRA 2014 introduced a tripartite system in a bid to minimise the possibility of misappropriation of pension funds by setting up three autonomous players; the Regulator, the Administrator, and the Custodian.

The Nigerian pension industry has grown significantly with pension contributors now over 9.5 million with a 14 per cent pension penetration rate as of December 2021. The industry’s assets under management gained significantly as it stood at N13.42 trillion as of December 2021 compared to N12.30 trillion and N13 trillion recorded in December 2020 and September 2021 respectively. This growth was mainly due to pension contributions received and the market valuation of the Federal Government of Nigeria (FGN) bonds and equities.

It is hoped that the shareholders and other stakeholders in the First Guarantee Pension Limited will allow the ongoing acquisition of the company by Access Holding Company to scale through to remain relevant in the scheme of things in the Nigerian pension industry.