. For the acquisition of 2.34bilion shares and another huge loans granted far back 2016 that allegedly failed to follow due process ,Otudeko is in trouble again and his hard earned image as well as his shareholding power may be endangered
By Amos Adetunji
Truly , the rich also cry . This is not one of the best moments for Obafemi Otudeko. The man is being tossed from one controversy to another ; Otudeko is surely under heated storms .Unfortunately, this situation has now become a threat to his hard earned image and that of First Bank .For the bank , it is a fear or problem of adverse public perception as well as a poor image of the group’s governance stability and sustainability.
The genesis of this new trouble is the unanticipated return of Oba Otudeko, the man tagged corporate raider by his critics , as the biggest shareholder in First Bank of Nigeria. The exercise may be legally justified, but many people both within the financial sector and outside have questioned its morality.
Naturally, Otudeko’s allegged desperation to gain control again over FBN had caused ripples, and the effect already spread far and wide. Otudeko who wielded enormous powers then was accused of sundry financial malfeasance, manipulations and unethical practices in the manner the share acquisition was executed.
Apart from that , last week his name came up again in the litany of frauds committed in 2016 as recently revealed by an ex-employee of the bank while the man is still battling with the issue of 2.34 billion shares claimed Babican Limited but being contested in the court currently .
The above issues have compounded series of allegations levelled against him in the past by Ecobank Transnational, the CBN and the leadership of the minority shareholders ; currently ,the man has a difficult task to prove himself innocent and to rid the bank of the heated controversy around its image.
Is This A Conspiracy Against Otudeko?
However, opinions are divided over the latest controversial issues indicated above . To some observers , the current troubles facing Otudeko could be traced to his rivals that were intimidated by his dramatic return to FBNH and his emergence as the largest single shareholder as opposed to the past allegations of insider loan abuse earlier leveled against him . These observers believed the agenda of the people behind those new issues against him is to cut his wings .
That could be true . Otudeko dramatic return was truly intimidating. The man that held 1.49 percent of First Bank shares in 2021 ,by 2023 , returned as the largest shareholder in FBN Holdings. That happened in a significant cross deal valued at N87.8 billion leading to an increased in his ownership stake in the company to 4.7 billion shares, representing a 14% interest.
His emergence as the biggest shareholder ,indeed, sent jitters down the spines of both the minority and major shareholders .For this , some observers alleged, the current troubles facing Otudeko is a script from other high powered and high interest shareholders being acted by their foot soldiers .
Analysts believed this is another phase of the power play of the past that nearly claimed the going concern of this bank . Significant shareholder troubles begun to mount on the back of struggles for commanding equity stakes in this financial institution as in the past few years . Allegedly involved in this new struggle are the three top shareholders that include Otudeko ,now the biggest single shareholder, notable shareholding energy maven, Femi Otedola, and influential and significant shareholder, Oye Hassan-Odukale. All of them had raised their stakes for power and influence at the financial lender.
However , while Otudeko is believed to be the target ,Otedola ,who is now the board chairman , is allegedly fingered to be responsible . “Otedola is not known to be either casual or decidedly modest ,the Nigerian business game master is deliberate, smart, and calculating”, a source declared . By this view , Otedola is believed to be a silent schemer .
This view about Otedola is confirmed by one of his past declarations .According to a media report, Otedola once said, “I am simply an investor who saw an opportunity in the financial institution and decided to take advantage of it through the investment I have made. My interest, contrary to speculations, is not to become Chairman of the bank or its Holdco. Moreover, I am in semi-retirement”.However, he eventually did the opposite, indicating he is flexible and ambitious too.
But some analysts said that his flexibility should not be used to portray him as a slippery person. They believed his decision not to sit on FBNH’s board then ,before he eventually did , was not a nod to the competence of the other people running the company in which he held the largest individual interest then . To them , his decision to do opposite later was more a desire to keep to his chest the subtle undertones of his equity move and to shield the expected final payoff from the prying eyes of third parties.
Even if Otedola is exonerated,what can not be disputed is that the battle among the three powerful shareholders is a reality .In fact the former board chairman,Mr. Remi Babalola ,who replaced Otudeko , had to step aside when he could not cope with the heat unleashed by Femi Otedola, and Hassan-Odukale struggle for supremacy after exit of Otudeko in a bid to raise their stakes for power and influence at the financial lender.
According to a report , “the battle between Otedola and Hassan-Odukale, created sparks but kindled no fire that could worry the board. The two gentlemen were at best distractions; the more serious problem was the lack of clarity over Otedola’s equity funding source. There was a growing belief that the equity play had deeper undertones with stronger institutional hands rolling the dice.”
Another source reportedly declared: “seeing that the underlying game was that of chess and not checkers; and that the interests involved were formidable, it would appear that our Chairman did the smart thing and hit the stop buzzer retiring from a game he could never win. He avoided allowing his name used as an imprint of validity.” In eight months, Babalola reportedly saw many grey sides of corporate Nigeria he had thought existed only in the hyperactive and perhaps over-indulged imaginations of Nollywood scriptwriters.
Otudeko Is Paying For His Past Errors
Even if it is a plan to cage Otudeko possible overwhelming power and influence and Otedola were behind the plot as alluded , some analysts believed the so-called rivals are only trying to exploit those allegations already on ground to unsettle Otudeko’s nerves and to avert a repeat of a similar scenario in the future.
For them , in a situation like this , power struggles are not unusual. This is particularly so as getting a company’s board to pull the organization in the right direction can be a mix of balancing egos, clever horse-trading, and clarity of purpose of a few good fellows, male and female. To them ,company boards should be the chief visioners of a business, they set the tone and the beat of a company, and everybody else adopts dance steps that match the rhythm.
Moreover , they know that good organizations see workers pull together with calculated order, but great organizations yield to coordination, creativity, and purpose in an environment of controlled chaos. The dance steps are far from random, but they are equally not robotic.
The absence of the above clever and deliberate orchestration had formed part of the FBNH/FBN problem in the past two decades and to stop a repeat of that ugly past is the current vision of Otedola led board now, a source disclosed.
A review of this lender’s recent history shows that each successive management had set out its own goals untied to either earlier or later corporate plans. The result had been a lack of corporate continuity with only episodic institutional progress
Consequently, some analysts believed Otudeko deserves the troubles if the ugly past of FBNH must be corrected or the damage repaired as his tenure allegedly brought untold misfortunes on this Nigerian oldest bank . A. look into the past of FBNH during his tenure confirms this view as much.
Impacts of the Allegations Against Otudeko on FBNH .
Truly, under Otudeko’s leadership as the board chairman that lasted almost a decade , FBN Holdings had a rollercoaster ride with the conglomerate surviving some disastrous loan binges that almost cost it its soul between 2011 and 2018.
The swirl of corporate governance missteps over the period saw the Financial Holding Company (HoldCo) swoon between 2018 and 2020. From having a board of directors disrupted by regulatory oversight concerns to coping with a regulator-imposed debt accommodation of weaker banks , the HoldCo was forcing itself through a gale of hard choices.
Moreover, the period between 2018 and 2020 was not just cold, but icy with the deposit money bank (DMB) seeing itself punched into a squared corner, as board infighting, rising operating expenses, and fragile insider-related loan conditions (as reported by the CBN) created a perfect storm.
After implementing the Holding structure in 2012, the group’s share price has shown modest volatility. Its share price declined steadily from N8.70K on January 1, 2015, to N3.80 on June 16, 2016, and eventually picked up slightly in 2018, where it rose to N14 per share. The rally faded between 2019 and 2021 as the share price fluctuated between N3 and N7 .
In the last one decade , its shareholders experienced the worst in the history of the bank. For instance, the year 2016 saw its non-performing loans spike and its share price fall to as low as N3 per share.FBNH had recorded a total loan impairment of over N565 billion between 2016 and 2020, with N376.4 billion, accounting for more than half the total loans impaired, provided for in 2016 and 2017 alone. Insider-related loans in First Bank were problematic and were responsible for the spike in bad loans, the CBN said at the time.
The Core Allegation Against Otudeko
Overall , the key allegation against Otudeko that is heavy and critical is the issue of corporate governance, under his leadership it was a complete mess. But this should not be allowed to repeat itself because corporate governance is the bedrock of all modern corporations. .How well a company survives lies in the quality of its board of directors and their understanding and preparedness to pursue a defined corporate purpose. Where the goal is unclear, the company sees itself drifting into crisis.
Even where clarity of purpose exists,a weakness of executive commitment to implementing set objectives inevitably bludgeons the company into despair and possibly disaster.Where corporate governance is ignored, executive decisions are always be in the interest of the few major shareholders; sometimes it is disastrously so .
In the banking industry , the most disheartening issue is that the minority shareholders and other stakeholders particularly the depositors with the biggest stake are usually at the receiving end of the battle for selfish interests pursued by the leaders .The depositors are the worst losers because the total deposits are usually in multiple of the shareholders funds .
Sequel to the above allegations rather than thinking about any conspiracytheory , some analysts believed this takeover artist is haunted by his past activities.
Otudeko who remains a principal actor by virtue of his shareholding and connection at FBNH, is currently at the receiving end of a huge backlash over his past stewardship and unorthodox ways of doing business.
Fresh Troubles of Otudeko.
From the above analysis, the opinion of some analysts is that whether because of the above allegations of the past or not ,this man must be probed and be made to either be vindcated or punished for his alleged dirty past .
Otudeko is currently facing two fresh battles that may endanger his image. Last week , the billionaire industrialist, Oba Otudeko, was in the eye of a storm again as a former employee of First Bank of Nigeria Limited, Adesuwa Ezenwa, has accused him of massive fraud during his time as chairman of FBN Holdings Plc, the parent company of the bank. The bank’s managing director/chief executive officer at the time, Bisi Onasanya, was also named in the allegations.p
Mrs Ezenwa, who the bank summarily dismissed in October 2016, has initiated legal action against First Bank at the National Industrial Court of Nigeria, Lagos Judicial Division, seeking redress for the termination of her appointment, which she said was done “without any reason whatsoever being offered.”
Mrs Ezenwa disclosed that unsecured loans of roughly N12 billion were availed, on one occasion, to a company in which Mr Otudeko has significant investment even though the facility was masked as loans granted to Stallion Group of Companies, which later spotted the false entry in its statement of account and complained.
In one case in 2012, she further alleged, an unsecured credit estimated at N2 billion was granted to Broadwaters Resources Company Nigeria Limited, which ended up being a conduit pipe used by Mrs Majekodunmi and Mr Onasanya to siphon monies from the bank. The claimant said the loan was never repaid.
“Out of the N12 billion camouflaged as lending to the Stallion Group, N8.21 billion was transferred through various accounts to a final destination account belonging to a company known as V-TECH LTD, which belongs to the chairman of FBN Holdings, Oba Otudeko, while the sum of N4.45 billion out of the same fictitious facility was transferred to Ontario Oil and Gas. The facility remains unpaid to date,” Mrs Ezenwa said in court fillings.
For the inability of Barbican Capital , a subsidiary of Honeywell owned by him , to obtain or secure a “No Objection” approval of some disputed shares claimed by it has continued to give him a some sleepless nights for sometime now . The shares ,which are 2.3 billion in number , have been still excluded from the records of First Bank Nigeria Holdings,FBNH for this purpose and have led a legal battle .
Battle Over 2.34b Shares in Contention
The conflict between FBNH and Barbican Capital centres around the latter’s claim to a significant stake in FBNH , a cumulative shareholding of 5,386,397,202 shares as of July 1, 2024, representing 15.1% of FBNH’s total outstanding shares of 35,895,292,791 units listed on the Nigerian Stock Exchange (NSE) was a battle confronting the businessman.
Barbican Capital noted that its 15.01% shares of FBNH are currently reflected in the dematerialised records of the Central Securities Clearing System Plc (CSCS) and appropriately captured by the registrars – Meristem Registrars and Probate Services Ltd. Thus, it further seeks to be accorded all the benefits of membership with respect to all shares recorded as owned by it in FBNH as reflected in the dematerialised records of the CSCS.
But Barbican Capital, from records seen, has yet to provide sufficient documentation to verify the full extent of its shareholding to the satisfaction of the regulators. The CBN’s verification process only confirmed 3,110,400,619 shares (representing 8.67% of FBNH’s total outstanding shares), out of the 4,770,269,843 shares initially claimed by Barbican Capital. The remaining 2,340,599,305 shares, representing 6.52% of FBNH’s shares, could not be verified, according to their January 2024 letter, due to insufficient evidence provided by Barbican Capital.
Barbican Capital’s positions are premised on the fact that the shares it owns are its personal property with all rights and privileges pertaining thereof and constitute proof of its shares with FBNH, based on Section 109, 110(1)(b) and 116 of the Companies and Allied Matter Act 2020. As such, neither FBNH nor the CBN can alter, reduce, or diminish its shares.
While the arguments are logically and fundamentally plausible as our Constitution preserves the rights and properties of all Nigerians, the issue is now be evaluated/examined from an industry-specific context. Banks, and now Financial Holding Companies (FHC) in Nigeria are governed primarily by the Banks and Other Financial Institutions Act (BOFIA) 2020 and guidelines by the CBN as provided for in the CBN Act 2007, both subject only to the 1999 Constitution.
The provision of Paragraph 3.2.1 of BOFIA 2020, as quoted by CBN’s 3rd Party Affidavit in reaction to the 3rd party notice, was clear on share ownership and its verification. According to the section, “An equity holding of 5% and above by any investor shall be subject to CBN’s prior approval. Where such shares are acquired through the capital market, the bank shall apply for a no objection letter from the CBN immediately after the acquisition.”
This is further corroborated by CBN guidelines, also quoted as; “Corporate Governance Guideline for Commercial, Merchant, Non-Interest and Payment Service Banks in Nigeria” effective from August 1, 2023, which requires that any entity acquiring more than a 5% shareholding in a financial holding company must either seek prior approval from the CBN or notify the CBN within seven days of the purchase to obtain a ‘No Objection’ or approval. According to sections 20.2(b) of the guideline, “CBN’s prior approval and No Objection shall be sought and obtained before any acquisition of shares of a bank (including through the capital market), that would result in equity holding of five per cent (5%) and above, by any investor.”
In this case, it behoves on Barbican capital to meet these provisions being the only condition to verify shares in the banking industry. Proshare’s Economy & Market Intelligence Unit (EMI) observed that FBNH notified the CBN of Barbican Capital’s shareholding exceeding the 5% threshold and initiated the verification process.
However, Barbican Capital, from records seen, has yet to provide sufficient documentation to verify the full extent of its shareholding to the satisfaction of the regulators. The CBN’s verification process only confirmed 3,110,400,619 shares (representing 8.67% of FBNH’s total outstanding shares), out of the 4,770,269,843 shares initially claimed by Barbican Capital. The remaining 2,340,599,305 shares, representing 6.52% of FBNH’s shares, could not be verified, according to their January 2024 letter, due to insufficient evidence provided by Barbican Capital.
Proshare’s Economy & Market Intelligence Unit (EMI) confirmed that other significant shareholders subjected to capital verification within the same period also had some portions of their shares unverified due to the lack of relevant contract notes and bank statements. Others, who provided all relevant documents, had all their shares sanctioned by the CBN.
Barbican Capital has justifiably relied on the fact that the Holding Company’s Registrars – Meristem Registrars and Probate Service Ltd – reflected its full shares. However, within the banking context, its inability to provide the requisite documents in its case: Financial Statements for 3 years, Tax Clearance Certificates for 3 years, and Statements of Accounts for the past 12 months appears to weaken the basis of its appeal from a procedural viewpoint despite its argument that it was incorporated in March 2023, a few months before the trial began.
Regardless of this, the statutory requirements cited by FBNH and, by extension, the regulator make it appear that Barbican Capital is attempting to bypass due process for FBNH to recognise its entire shareholding; and by extension, the ongoing verification by the CBN. Earlier communications of FBNH’s company secretary, in a series of letters, to Barbican Capital on the processes and requirements for the CBN verification, which cannot be bypassed under any circumstance, would appear to strengthen the Holding company’s argument (in the public court).
In what appears like a regulatory mediation, the CBN appears to have offered Oba Otudeko/Honeywell Group one representation on the Board, dependent upon the withdrawal of all court cases. Proshare analysts argue that Barbican (Oba Otudeko/Honeywell Group) is entitled to board representation proportionate to ownership regardless of his withdrawal from the existing cases, as he remains a significant shareholder, status quo ante bellum.
Ecobank Loan Repayment Controversy
Ecobank Nigeria Limited took its fight against Otudeko a step further when it counselled FBN Holdings, the parent company of First Bank against approving any more of the questionable investments because of Otudeko and his company’s massive indebtedness. However, part of Otudeko’s undoing is his brazenness which is the fact that he did nothing to avoid a possible conflict of interest in his years at FBN board. According to Ecobank, all the loans were personally guaranteed by Otudeko with his privileged position on the board of First Bank. And this is unethical.
With all the evidence at it disposal, it is interesting to note that Ecobank, through it lawyers, are providing insights and widening the conflict. Aside from Otudeko’s complicity in personally guaranteeing loans for his companies, there is also the investment in FBN Holdings through Barbican Capital Limited, an affiliate company of Honeywell Group Limited that purchased 4,770,269, 843 FBN Holdings shares in a deal worth N87.8 billion. Additionally, the controversial shares which were purchased at N19 per unit remain the largest volume of FBN Holdings shares traded since 2012.Ecobank had in no distant past accused Otudeko of Diverting Assets, Says FBN Holdings Should Reject Honeywell’s First Bank Share Purchase
Ecobank said Otudeko’s “humongous indebtedness” is N13.5bn and he should repay the loan rather than buying shares in another bank.
Following a strategic investment that the Honeywell Group made in FBN Holdings Plc through the purchase of majority shares in the holding company (holdco), that is now a subject of legal action , Ecobank Nigeria Limited had advised FBN Holdings, the parent company of First Bank of Nigeria Limited, against approving or accepting the investment due to an alleged outstanding “humongous indebtedness” by the company and its founder, Dr. Oba Otudeko.
Ecobank Nigeria, a subsidiary of Ecobank Transnational Incorporated (ETI), in a letter through its lawyer, ‘Kunle Ogunba & Associate, dated July 7, 2023, addressed to the Managing Director of FBN Holdings, pointed out that Honeywell Group and Otudeko were indebted to the bank to the tune of N13,507,052,417.99. It stated that with the investment in FBN Holdings, Honeywell Group and Otudeko were diverting funds that ought to be used for the repayment of the loans.
Allegation Against Otudeko From Minority Shareholders Leadership
The Chairman of the Trusted Shareholders Association of Nigeria, Alhaji Mukhtar Mukhtar, alleged that there were strong indications that the plot to stop the AGM was from the former Chairman of FBNH, Oba Otudeko, adding that the resolutions to raise more capital for the bank and to appoint directors to the board were met with stiff disapproval as the resolutions would cut the control the former chairman has on the bank.
The shareholders activist alleged further that, “A greater majority of FBN Holdings’ shareholders want the annual general meeting to hold and all the resolutions to be considered but unfortunately, some individuals approached the court and are threatening the board and the directors of First Bank from holding the AGM and for considering those resolutions.
“I think this is very unfortunate and unacceptable. That is why we said the regulators should come in. There are some suspicions and allegations that Oba Otudeko is the one that is fuelling this crisis and I don’t think it is proper for a person of Oba Otudeko’s standing to be involved in this kind of unsavoury behaviour, blocking the progress of an institution which have benefitted him and still benefitting him.”
In what looked like a save-our-soul plea, Muhktar said, ”The shareholders are begging you, please leave First Bank alone, allow First Bank to progress, allow First Bank to go ahead. Other banks are already catching up. They are moving on. So continuing to block First Bank of Nigeria from taking steps that are going to make the bank stronger, increase its share capital and then increase the shareholders’ fund is not a good step.” “We will continue to protest. We have written petitions to the regulators and we will continue to write more petitions. The regulators should come in. They cannot continue in their complacent behaviour in the face of abuse. They must ignite certain regulatory powers, they can suspend the shares of those people who attempt to hold this bank to ransom.
“We cannot allow this bank to die therefore, the regulatory authorities must act now because they just cannot be quiet,” he said.
He alleged that about N1.7 trillion was mismanaged under the leadership of the former chairman of the institution and that the bank had to write off the amount in the last six years, explaining that it was for that reason the CBN sacked him and his team.
He said, “It is painful to see individuals, who have benefited from the bank, who had made the bank write off N1.7 trillion bad loans in their book now turning round to block the progress of the bank, I think it is unfortunate.”
Earlier this year, Oba Otudeko’s Honeywell Group reportedly bought the largest shares of First Bank of Nigeria Holdings Plc in a cross deal worth N87.8 billion.
Allegation of Shady and Dramatic Return Of Otudeko
Oba Otudeko reportedly returned as the largest shareholder in FBN Holdings. In a significant cross deal valued at N87.8 billion, Otudeko increased his ownership stake in the company to 4.7 billion shares, representing a 14% interest.
The shares, acquired at a rate of N19 per unit, represent the highest volume of First Bank shares traded within a single day since 2012, marking the beginning of data published by the stock exchange. However, the transaction has escalated concerns regarding the legitimacy of the trades, as no shareholder had previously been officially recorded as owning such a substantial number of shares.
While an official press release clarifying the details of the trade is still pending from the Nigerian Stock Exchange, a shareholding disclosure submitted to the Company Secretary of FBN Holdings Plc on July 7, 2023, by Honeywell Group Limited disclosed that Barbican Capital Limited, owned by Otudeko’s children, has procured a total of 4,770,269,843 shares in FBNH.
“We write on behalf of Barbican Capital Limited, an affiliate of Honeywell Group Limited and refer to the provisions of Sections 119 and 120 of the Companies and Allied Matters Act 2020 (as amended).
“In addition to the previously disclosed interests by Honeywell Group Limited’s affiliates, kindly take this as notification that, as of 7th July 2023, Barbican Capital Limited has acquired an aggregate of 4,770,269,843 shares in FBN Holdings Plc. Kindly accept the assurances of our highest regards.” Honeywell Group said in a “disclosure of shareholding”
In a letter signed by the acting company secretary, Adewale Arogundade, FBN Holdings Plc has also officially acknowledged the acquisitions made by Honeywell Group Limited.
“This is to inform the public and our stakeholders that the Company received a notification dated July 7, 2023, from Honeywell Group Limited that its affiliate, Barbican Capital Limited, has acquired an aggregate of 4,770,269,843 units of shares from the Company’s issued share capital of 35,895,292,791, as at the above-referenced date. Based on the foregoing, the equity stake of Barbican Capital Limited in the Company is 13.3%,” the letter read.
Based on reports, the cross-deal supposedly included 26 proxy shareholders who are purportedly connected to Oba Otudeko. These shareholders consist of entities such as Bethlehem Properties Limited, Musa Haruna Foods, Yazidu Zakari Ventures Limited, Thornbull Securities Limited, and Moore House Limited. Additionally, other entities involved are Impressario Limited, Mahmoud Alheri Limited, Timothy Banfield Limited, and The WhitBread Limited.
