Pension funds’ new capital raise triggers M&A

Barely a month after the end of the pension industry recapitalisation, which led to the successful emergence of 20 players, another wave of mergers and acquisitions (M&A) is brewing in the sector.

The recapitalisation that ended on April 21, 2022 required Pension Fund Administrators (PFAs) to increase their capital from N1 billion to N5 billion.

Access Holdings, owners of Access Pension Fund Custodian (PFC), last week announced the sale of its custodial business to First Pension Custodians. It also announced another plan to acquire a majority stake in First Guarantee Pension PFA.

Access Holdings said in a statement that it had entered into a definitive agreement with First Guarantee Pension Limited regarding the potential acquisition of a majority equity stake in the company.

“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 largest bank by customer base,” Herbert Wigwe, group CEO of Access Corporation, said.

He said the National Pension Commission and the Central Bank of Nigeria had given their “no objection” to the transactions, the completion of which is subject to the receipt of all required regulatory approvals.

Access Holdings had earlier announced plans by Access Bank to divest from its pension custody subsidiary.

According to a statement, Access Bank has entered into a definitive agreement with First Pension Custodian Nigeria Limited, a subsidiary of FBN Holdings Plc.

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.

Experts in the pension industry had predicted another wave of M&A that would follow the last recapitalisation exercise, and snowball into major consolidation for the industry.

Read also: Recapitalisation for PFAs and the welfare of Nigerian pensioners

Dave Uduanu, managing director/CEO of Sigma Pension Limited, said: “I think it is a good thing that there are 20 PFAs standing, but I think it is still early days and I believe there will be more consolidations in this space.

“If you look at the pension industry, it is still very fragmented. Beyond Stanbic IBTC Pension that controls around 40 percent of the market share, there are a lot of fringe players; so there would be more consolidations in the space.”

Uduanu described the entry of banks into the pension industry as a good development.

“I think they will bring more capital, more resources, more infrastructure in terms of branch network, technology, and just the aggression the banks have used to do their banking businesses. But more importantly, they will be a very formidable competitor to the number-one player. So, I think it is good news,” he said.

Pius Apere, chairman/CEO of Achor Actuarial Services Limited, said the regulatory recapitalisation was expected to lead to stronger PFAs with improved capacity for more efficient service delivery.

“It is likely to create a level playing field in the pension sector where all PFAs would have the necessary funds to deploy adequate technology and embark on human capital development required to achieve efficient service delivery, e.g. enhancing the transfer window,” he said.

Apere said competition within the industry would mainly be based on efficient service delivery, rather than capital.

“However, the operators will still have different levels of capital and size of assets under management, which will remain a key competitive tool despite the regulatory recapitalization requirement,” he added.