Culled—Proshare

June 26, 2020

by CardinalStone Research

Proposed acquisition of AIICO Pension could be positive

FCMB Group Plc (FCMB) – TP N2.00 (HOLD) has announced ongoing conversations for a potential acquisition of AIICO Pension Managers Limited (AIICO Pensions) by its subsidiary, FCMB Pension Managers Limited (FCMB Pensions). According to the statement, the deal would involve FCMB Pensions acquiring the 70% stake held by AIICO Insurance Plc and 26% of minority-controlled shares.

Initial assessment

We view the potential acquisition as a positive move; a statement of intent from FCMB’s management to leverage on its non-banking businesses to drive overall profitability.

Broadly, we expect the proposed acquisition to have the following impact on FCMB:

• AUM: Acquiring AIICO Pension’s N124 billion funds under management could lead to a consolidated AUM of N447.7 billion for FCMB Pensions, a 38.0% increase compared to its position as at Q1’20
• Fee income: The expected increase in pension AUM is likely to support FCMB’s fee income. This support is likely to offset the impact of PENCOM’s revised fee structure for the industry, which could potentially shave off 7.8% of asset management fees assuming a flat AUM. We see scope for a 13.6% to 26.2% increase in Asset Management fees as a result of the inorganic expansion alone

Synergies: With both firms likely to continue operating as standalone entities, it is unlikely that the deal will lead to significant cost synergies as most cost centre activities could still be duplicated. However, the opportunity to cross-sell to an expanded clientele base suggests that the move could be positive for revenue.