The merger and acquisition breeze is gradually blowing across the nation’s pensions industry. Earlier, LeapFrog Investments, an emerging market-focused private equity fund, and Helios, another private equity fund, bought different stake in ARM Pensions Managers.
The latest acquisition deal now involves FCMB Pensions which is set to acquire 96 percent stake in AIICO Pensions, as the two organisations involved in the deal have notified all the stakeholders. According to the statements released by both firms, the deal, which amount is yet to be disclosed, will see AIICO Insurance Plc sell 70 percent of its shareholding in AIICO Pension Managers to FCMB Pensions Limited while other AIICO Pensions’ shareholders will sell 26 percent of their stake to FCMB Pensions, thus bringing the proportion of the AIICO Pensions to be acquired to 96 percent.
“AIICO Insurance Plc hereby notifies the Nigerian Stock Exchange (NSE) that AIICO has entered into discussions with FCMB Pensions Limited, for the sale of 70% stake in its Pension Management subsidiary, AIICO Pensions Managers Limited to FCMB Pensions Limited. The proposed sale is AIICO’s stake of 70% and other shareholders stakes of 26% thus bringing the cumulative sale of 96% stake to be purchased by FCMB Pensions.
“At the conclusion of the proposed sale, AIICO Pensions shall cease to be a subsidiary of AIICO Insurance Plc. The proposed transaction is subject to the approvals of the National Pension Commission and the Federal Competition and Consumer Protection Commission. We shall notify the Nigerian Stock Exchange once the relevant approvals for the transaction are received. Dated this 25th day of June 2020”, according to the statement released by AIICO Insurance released to stakeholders last week.
BusinessDay Research & Intelligence Unit (BRIU) wanted to know the strategic edge this move will the acquiring institution, and found that, among many other benefits, FCMB Pensions will gain more market share and higher contribution to industry profit.
As at April 2020, the total assets of Nigeria’s pensions industry stood at N10.58 trillion. In terms of categorisation, N1.12 trillion of the assets were classified as existing schemes; N1.29 trillion belonged to close pension fund administrators, while retirement savings accounts were worth N8.16 trillion.
The top five pension managers in the country accounted for 76.7 percent of the industry profit in 2018. Stanbic IBTC Pension Managers made 40.6 percent of the industry profit in 2018 and 39 percent of the same metric in 2017. It was followed by Zenith Pensions Custodian that made 13 percent of the industry profit in 2018 and 14.3 percent of the same metric in 2017.
First Pension Custodian, UBA Pensions and ARM Pensions accounted for 8.6 percent, 8 percent and 6.6 percent of the industry profit in 2018 and while in 2017 their shares of the industry profit were 9.2 percent, 7.6 percent and 6.4 percent in that order.
AIICO Pensions, the institution to be acquired in this deal, made N317.3 million and N219.4 million as profit after tax in 2017 and 2018 respectively representing 0.7 percent and 0.4 percent of the industry profit in those years. Also, FCMB Pensions made N1.03 billion PAT in 2018 and N879.5 million PAT in 2017 to account for 2.1 percent and 1.8 percent of the industry profit respectively in those years.
When the deal is eventually consummated as parties still await approvals from the regulatory institutions, FCMB Pensions’ contribution to industry profit will increase to 2.5 percent, meaning that if the target of the firm is more market share, other rounds of mergers and acquisitions might soon follow.
“In the financial industry, size matters. Your size dictates the kinds of transactions you can pull and synergy you can form with other market players. So, this deal is targeted at getting more market share”, an analyst who pleaded anonymity, said.
FCMB Pensions is one of the PFAs in the country licensed by the National Pension Commission. It has over N330 billion assets under management which are made up of retirement savings accounts, retire accounts as well as privately managed pension funds for institutions. As a member of FCMB Group, FCMB Pensions has over 350,000 pensions contributors in about 48 locations across Nigeria.
AIICO Pensions has over 240,000 pension contributors with assets under management worth N120 billion. The parent company, AIICO Insurance Plc is a market leader in life insurance, retirement services and non-life insurance services.