Atlas Mara Limited, one of the foreign anchor investors seeking 25% stake in Agricultural Development Bank (ADB), is to conclude a Confirmatory external and internal due diligence by next week July 15, 2015.
After the month-long due diligence period that commenced on June 15 2015 ends next Wednesday, the investor will begin the execution of transaction documents by August 1, 2015

These details comprise clause 5 relating to timelines for the execution of the heads of term agreement signed between ADB and Atlas Mara on June 4, 2015. The twelve (12) page document with 26 clauses, has the heading ?Key Terms and Conditions for an Equity investment in ADB by Atlas Mara.?

In comparison, the agreement with NorFund for 15% equity shares, is in three pages and has 15 clauses.
The timeline clause states that ?The parties undertake to use their respective reasonable best efforts to execute the transaction documents and complete the transaction (Completion), including any required internal or external approvals such as regulatory or third party, as expeditiously as practicable and shall endeavor to do so in accordance with the following timeline.?

The first item in the timeline is execution of the heads of terms agreement from June 5 2015 followed by the confirmatory due diligence and the last item is the execution of transaction documents by August 1.
According to clause 7 on transaction terms, ?Unless otherwise agreed by the investor and the company, the investor will invest up to US$ 50 million equivalent in the company through the subscription for ordinary shares of the company each at the subscription price. Post the IPO, the investor will directly own at least 25% of the shares outstanding of the company. The ordinary shares issued to the investor will rank paripassu in all respects with the existing ordinary shares.?

A stock analyst has indicated that this has the potential of Atlas Mara even buying more ordinary shares during the ADB IPO to shore up its stake beyond the 25% agreed on.

The clause 7 also adds that ?On the Completion Date, the investor shall deliver to the company , by wire transfer the subscription price, to an account designated in writing by the company. Atlas Mara confirms that subject to satisfactory completion of confirmatory due diligence and the conditions precedent to completing the transaction under Clause 8, it will be in a position to complete the transaction including provision of payment of the consideration.?

Clause 8, a referred to in clause 7 above details the key conditions vis-?-vis undertakings which states that ?Completion and implementation of the transaction shall be subject to the fulfillment of the following conditions to the investor?s satisfaction prior to the completion date or, at the investor?s sole discretion, by way of written undertakings to be contained in the transaction documents (on terms acceptable to the investor) as the case may be:

?i. Due diligence: the investor shall conduct due diligence (including strategic, commercial, financial, tax, credit, legal, anti-corruption, etc) with respect to the transaction to its sole and absolute satisfaction;
?ii. Governance, consent and approvals: the investor and the company each having received all necessary consensus or regulatory approvals for the IPO, the transaction, and final approval from their respective governing bodies (investment committee and Board), and in the case of the company, any required shareholder approvals and waivers of any pre-emptive rights to complete the transaction.

?iii. Regulatory approval(s): receipt of the relevant regulatory approval of the bank of Ghana and any other necessary consents or regulatory approvals for the IPO and the transaction.
?iv. Shareholder base: no material change in the existing shareholding of the company shall have occurred prior to the completion date.

?v. No material change in the compensation scheme of management or other employees of the company shall have occurred prior to the completion date.

?vi. Business plan: prior to entry into the transaction documents, the parties will have agreed to the company?s business plan including a management incentive scheme to align the interests of the company?s key management and its shareholders;

?vii. Policy matters: the company formally adopting mutually agreed standards relating to finance, environmental, social, governance, anti-corruption, and ant-money laundering and counter-terrorism financing, to comply with international best practice and in any event with world bank/IFC standards over the investment horizon;
?viii. Documentation: negotiation and execution of this heads of terms and the transaction documents satisfactory to the investor, these documents being by English law, where appropriate, including dispute resolution provisions which providing for referral to a single arbitrator appointed by the London Court of International Arbitration in accordance with its rule;

?ix. Regulations of the company: subject to the approval of regulators and shareholders, the regulations of the company being revised, if need be, to take account of and give effect to the terms of the transaction and any other necessary documents;
?x. Confirmation that the investor nominated director(s) have been appointed to the board of the company subject to bank of Ghana and shareholder ratification and other proposed board members to be appointed by the company or other equity investors having been revealed to Atlas Mara so that Atlas Mara may assess whether such appointments may expose Atlas Mara to any risks.

?xi. Inclusion in the transaction documents of an exit mechanism giving effect to clause 10 below.?
Clause 9 on voting rights states ?The investor?s minimum voting rights shall be proportionate to its percentage holding in the issued shares of the company.?

And clause 10 on exit mechanism goes as ?While the nature of the investment is intended to be long-term, to provide optionality, the parties agree on the following mechanism to facilitate the investor?s exit, which terms will be expressly included in the relevant transaction documents as ? Sale of shares: concurrently with the completion of the transaction, the company will be listed on the Ghana stock exchange (GSE). The investor would have the express right to sell any and all of its shares on the GSE subject to the lock-in period and regulations of the exchange ??.

Clause 11 on lock-in period states that ?The investor shall not sell, dispose or transfer the issues shares for up to six months after the completion date, other than in relation to permitted transfers to an Associated Party (provided that such Associated Party remains subject to similar lock-in period restrictions).

According to thestock analyst, this is where there is the potential of firms like First Rand Merchant Bank coming into the picture as major investors in ADB. There are speculations that either of the anchor investors could be fronting for First Rand, though the ADB MD Steven Kpordzih has dismissed that allegation earlier on.
Assuming that First Rand is as an associated party participating in the ADB IPO, then it could benefit as one of the major shareholders in the bank, the analyst observed.

The analyst stated that there are a lot of questions to be answered by ADB regarding the two agreements signed with NorFund and Atlas Mara, suggesting that if possible the whole agreement documents should be put out into the public domain so that Ghanaians will know the truth for themselves.

ADB should have been more responsible towards the public by disclosing these deals prior to the IPO, rather than hiding them, the analyst suggested.

By Amewuga Ablordeppey

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