In a statement to the media released on Friday, African Bank confirmed its bid and that it will acquire the majority of Ubank’s disclosed assets and liabilities.
The statement further revealed that the bank will also take Ubank’s employees on an ongoing concern basis and CEO Kennedy Bungane confirmed the news.
It is also announced that the bank will part ways with a whopping R80 million fee for the deal but it won’t be acquiring the Ubank legal entity and any residual assets and liabilities that will remain with it.
”This is quite common to do when you have a situation like this, a company that is under curatorship and is no longer under its management and shareholders who would know more in terms of disclosures to the potential buyer,” said Bungane.
“This means that African Bank will only acquire Ubank’s customers, deposits, and loans. But it won’t acquire the Ubank brand or its banking license since it has its own.
“The clause about leaving out any residual assets and liabilities was also to protect African Bank should there be any information the curator didn’t disclose or wasn’t aware of during the due diligence process.
“Their abilities, which are largely deposits from customers, are quite attractive at about R4.7 billion. They are quite sticky. They’ve got very loyal customers, largely mineworkers.
“They’re very attractive to us in terms of helping African Bank in its mission to reduce its cost of funding and diversify its funding mix, in favour of retail deposit over and above wholesale funding.”
The CEO also explained that the curator approached African Bank towards the end of May and that the bank aimed at ensuring that should something come up in the future, it would be the problem of the legal entity, not African Bank’s.
In the wake of this massive transaction, African Bank will now get a foothold in the mining sector, where Ubank has a strong market position and distribution footprint.
Furthermore, African Bank is also looking to migrate Ubank’s customers to its transactional bank account, MyWORLD.
According to Bungane, he pointed out that the lack of capitalisation in Ubank and the fact that it was incurring losses led to the company’s failure to attract consumers.
“African Bank believed that its strong retail deposits, transactional accounts, and partnership with MTN’s Mobile Money would accelerate the diversification and growth of its business,” reports Fin24.
Main Image: African Bank/BusinessLIVE
