Recapitalisation: Operators resort to mergers, acquisition

Recapitalisation: Operators resort to mergers, acquisition

Wednesday, June 11, 2014 5:16 pm

Lagos – Most stockbroking firms are now resorting to mergers and acquisitions to scale through the Securities and Exchange Commission (SEC) recapitalisation deadline for capital market operators, the News Agency of Nigeria (NAN) reports.

Investigations by NAN showed that the tempo of consolidation and acquisition meetings have increased as the economy enters the second phase.

A senior stockbroker who pleaded anonymity told NAN on Wednesday in Lagos that the affected stockbroking firms had been holding series of meetings for possible acquisition or merger.

He said the affected brokers were working round the clock to consolidate their businesses before Dec. 31, 2014.

According to him, the limited time frame and the reality of the regulators’ commitment in enforcing the recapitalisation programme, has compelled the operators to resort to mergers and acquisitions option to avoid forced closure.

Confirming the development, Mr Emeka Madubuike, President, Association of Stockbroking Houses of Nigeria (ASHON), said that the association was considering the option.

Madubike said that ASHON in the next couple of weeks would organise a workshop on recapitalisation to enlighten members on the various options.

He said that mergers and acquisitions were one of the options being considered by the association.

Madubuike said that ASHON would continue to discuss and engage with SEC, noting that the policy should be taken for the overall interest.

He said that operators would continue to seek audience with the commission, and that policies should not be introduced without necessary consultation.

NAN reports that SEC on Dec. 19 issued a new capital requirement for capital market operators with December 31, 2014 as deadline for them to recapitalise.

A breakdown of the new capital requirement obtained by NAN showed that broker/dealer now requires a minimum capital of N300 million or an increase of 328.57 per cent compared with the initial capital of N70 million.

A broker is now required to increase its capital to N200 million from N40 million, while a dealer’s minimum capital now stands at N100 million against N30 million.

Issuing Houses operational capital requirement also rose to N200 million from N150 million and underwriters are now expected to have N200 million as working capital from N100 million.

Under the new capital requirements framework, a registrar’s operational capital has been reviewed up to N150 million from N50 million.

Trustees capital requirement also improved to N300 million from N40 million and rating agency from N20 million to N150 million.



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