The Sterling Bank Saga: The Bank's Explanation
We have received enquiries from some of our shareholders on the basis/ rationale for the recent
reconstruction of Sterling Bank’s shares. Please find below our response and the chronology of
events leading to the reconstruction.
The five banks that merged into Sterling bank entered into a scheme of merger, sanctioned
by the court, which provided for two key review exercises to be undertaken in order to,
where necessary, adjust the relative pre‐merger values of the legacy banks. The two review
exercises prescribed in the scheme were:
A close‐out audit of the accounts of each of the legacy banks as at 31st December
2005: to take into consideration and compensate pre‐merger shareholders for changes
that had occurred to the legacy banks’ values since 31st March, 2005, when due diligence
was conducted on the banks, i.e. the cut‐off date for the merger.
Post‐merger adjustments: to further compensate pre‐merger shareholders of the
legacy banks, for material changes attributable to any of the legacy banks, provided that
the aggregate value of such material change exceeded N100 million.
In connection with the above, each of the legacy banks appointed a firm of auditors/
consultants as its shareholders’ representative. The five shareholders’ representatives,
who derived their power from the court sanctioned scheme of merger, submitted a
report dated 13th March, 2007 wherein they unanimously recommended the issuance of
additional 13,317,026,285 ordinary shares as compensation shares to be issued to the
various shareholders of the legacy banks who hitherto, were the holders of
10,552,847,651 ordinary shares of the bank.
The shareholders’ representatives, mindful of the implication of almost 24 billion shares in
issue also recommended a reconstruction of the entire shares.
The shareholders of the bank, at the 45th annual general meeting held on 28th August, 2007,
approved a resolution for the reconstruction of the entire shares of the bank i.e.
23,869,873,936 ordinary shares of the bank.
In the statutory notice of the annual general meeting, which was published in at least two
national daily newspapers, it was specifically stated under special business, among others,
‘To consider, and, if thought fit, to pass the following resolutions as special resolutions:
RESOLUTION 10:‘that the directors be empowered to reconstruct the bank’s shares as a result of the postmerger
share adjustment in accordance with the approved scheme of merger on the basis,
terms, and at a time to be determined by the directors’.
This resolution was unanimously approved at the annual general meeting.
The two key regulatory agencies, the Nigerian Deposit Insurance Corporation (NDIC) and the
Central Bank of Nigeria (CBN), in September 2007 separately wrote to the bank to invoke the
clause relating to the close‐out audit share adjustment in the scheme of merger to
compensate the shareholders of the legacy banks as recommended by the shareholders’
The Board of directors of the bank consequently applied for regulatory approvals to issue
the compensation shares and simultaneously reconstruct the shares from the CBN, the
Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE); all the
approvals were obtained.
The bank subsequently placed the shares on total suspension from daily trading in order to
effect the issuance of compensation shares as well as the reconstruction of the shares of the
bank. This reconstruction was carried out at a ratio of 10 new shares for every 19 existing
It is true that the reconstruction of the original 10.5 billion shares (10 for 19) should have led
to a simultaneous doubling of the share price; however, the issuance of the additional
13,317,026,285 compensation shares (also reconstructed) automatically diluted the
The situation was further exacerbated by the current bearish market.
We wish to assure our numerous shareholders that the merger/ integration process has now been
completed and the bank is on course to deliver superior return on investments and enhance
Should you require further clarification, please contact our investor relations officers listed below:
Sade Adebayo: +234 803 300 7393, email: email@example.com
Folake Sanu: +234 803 601 3361, email: firstname.lastname@example.org
Emmanuel Ajayi: +234 802 536 9826, email: Emmanuel.email@example.com