There is strong speculation that Zenith Bank Plc will have $850 million of its shares approved for listing by the management of the London Stock Exchange (LSE) on its bourse as Global Depository Receipts (GDR).
A GDR is a negotiable certificate held in the bank of one country representing a specific number of shares being traded on the exchange of another country.
The GDR listing on the LSE and the trading of the instrument on the LSE had been approved by shareholders of Zenith Bank since November 21. The LSE said last week that it was expecting an increase in new listings from African companies.
The management of Zenith Bank has set the objectives of the GDR issuance to be an increase in the bank’s visibility and trading in its securities, as well as expanding and diverisfying its investor base.
The bank disclosed that all the necessary regulatory approvals for the listing have been gotten, adding that the deal would benefit investors who prefer to hold dollar assets to invest in the bank.
“Investors can only switch a maximum of $850million worth of local shares into the GDR programme. The price of the GDR would be based on the naira exchange rate and the local price of the shares,” the bank said.
It is hoped that the listing will be completed in two weeks.
Zenith Bank’s shares closed at N21.49 per share on Tuesday on the Nigerian Stock Exchange (NSE), giving it a total market capitalization of N674.7 billion. One GDR will be equal to 50 ordinary shares, says the bank. JP Morgan will be the depository bank, while Citibank be the custodian.
With this listing, Zenith Bank will join three other Nigerian banks with GDRs trading in London – Guaranty Trust Bank, Diamond Bank and First Bank.
Analsyts at Renaissance Capital, an investment bank endorsed the fact that the GDRs are non-capital raising, especially given that Zenith Bank is the most capitalized Nigerian bank (with a 9M12 capital-adequacy ratio of 29 per cent) and as such, does not require any capital injection.
It added: “The GDR issuance simply gives shareholders the option to convert to an LSE-traded instrument. The conversion ratio is 50 ordinary shares to one GDR. We understand that the conversion fee will be waived for the first three months post-listing and the structure will be somewhat similar to Guaranty Trust Bank’s GDR.”