20th May, 2010
The share purchase agreement between Skye Bank Plc and First Inland Bank now Finbank, has resulted in legal hostility.
What led to the ensuing legal battle started in November 2007, when First Inland Bank proposed to offer to the public five billion ordinary shares of 50k each at N9.50k per share; four billion preference shares of 50k each at N9.50k and a right issue of 968,863,000 ordinary shares of 50k each at N8.50k per share.
Skye Bank Plc was one of the eight issuing houses jointly appointed by First Inland Bank, it was also one of the nine underwriters engaged to underwrite the hybrid offer.
It was alleged that Skye Bank, in accepting to underwrite the offer, clearly stated that it was only willing to provide underwriting to a maximum of N10 billion.
Consequently, the plaintiff and other underwriters entered into an agreement that they would not underwrite the preference shares.
On 30 January, 2008 when the offer closed, the ordinary shares were oversubscribed and the preference shares grossly under subscribed. More so, the foreign investors the defendant had alleged were guaranteed to take up the preference shares did notÂ materialise.
After the closure of the offer when the defendant was having problems and was under pressure to shore up its capital base, it convinced Skye Bank to subscribe to and pay for the preference shares that had been allocated to it as part of its offer.
Skye Bank then agreed to pay for the 467,840,000 units of redeemable preference shares in the share capital of the First Inland Bank upon the following terms:
â€¢That Skye Bank shall be entitled to exercise a put-option in relation to the shares requiring First Inland Bank to repurchase the shares of a price to be mutually agreed, but in any event not less than the sum of N4,444,480,000 to be paid by Skye Bank for the shares.
â€¢First Inland Bank would maintain a deposit account with the plaintiff in an amount equivalent to the minimum agreed value of the preference shares as security.
In consonance with the terms of the agreement, First Inland Bank placed N4,450,000 with Skye Bank as deposit and security for the exercise of its put-option.
Following the payment of N4,444,480,000 by Skye Bank, a certificate was issued to the effect and as at 1 July, 2009, the bank and other preference shareholders constituted three-quarters of the First Inland’s preference shareholders.
In accordance with the rights attached to the preference shares, Skye Bank, on 1 February, 2010, exercised its put-option, but the prevailing market price of the preference shares was below N9.50k. The plaintiff then requested the defendant to purchase the shares at the issue price of N9.50 per share.
However, on 4 February, 2010, the defendant conveyed its refusal to redeem the preference shares as requested in defiance of the right attached to the preference shares and the agreement of both parties.
Following the refusal of First Inland Bank to redeem the preference shares, Skye Bank accordingly foreclosed on N4,450,000 placed with it by the defendant as security for the exercise of the put-option.
Consequently, the plaintiff is now urging the court to declare that it is entitled to apply N4,450,000,000 placed with it by the defendant in furtherance of the agreement entered into between the two parties to satisfy the put-option rights.