Finance

Facing Acquisition Roadblocks, Oragroup Turns to Recapitalization

Facing Acquisition Roadblocks, Oragroup Turns to Recapitalization
Thursday, 29 August 2024 15:35

(Ecofin Agency) - Oragroup is shifting its strategy after running into difficulties with its planned acquisition by Vista Bank. The bank is now focusing on stabilizing its financial situation through recapitalization, following a downgrade by Fitch to a "CCC-" rating. Alongside this, Vincent Le Guennou is stepping down from his role as chairman of the board.

Last week, Oragroup decided to reassess its approach after facing regulatory hurdles in getting the necessary approvals from WAEMU for its acquisition by Vista Bank. The banking group, which operates in 12 countries across West and Central Africa, has now terminated its exclusive sale agreement and is moving towards recapitalization.

This decision comes amid financial difficulties, highlighted by Fitch Ratings' downgrade to "CCC-" in April. The rating agency pointed to the risk of a default on senior obligations, citing prolonged non-compliance with capital requirements and tight liquidity at the bank's holding company level.

August marked a year since the initial agreement with the Burkinabé group, and the main selling shareholders, including Emerging Capital Partners (ECP), the lead shareholder, along with the European Investment Bank, DEG (a KfW subsidiary), Proparco, and Envol Afrique LLC, have reconsidered their positions.

In August 2023, Vista Group announced its agreement to acquire 61.4% of Oragroup, the holding company of Orabank, intending to create a major banking player operating in 16 countries across West and Central Africa. The merged entities were expected to have over 270 branches and assets totaling more than $10 billion.

To facilitate this deal, Vista Group set up a special vehicle, "ORA SPV HOLDING," to acquire Oragroup's shares and secured financing from BOAD (CFA25 billion) and Afreximbank (€253 million). However, the transaction hit a snag due to the WAEMU Banking Commission's demands for additional guarantees from Vista Bank. The commission had ordered the recapitalization of the holding company, with a deadline set for December 31, due to observed deficiencies.

This situation presents a setback for Vista Bank’s expansion ambitions across 25 countries, as the bank has been aggressively pursuing growth in the African banking market.

As part of its new strategic direction, Oragroup, ranked 6th in assets in WAEMU and 8th in market share at the end of 2023, must strengthen its equity capital by the end of the year. These developments come amid tightening regulations aimed at ensuring the financial stability of the region's banking institutions.

There has also been a significant change in the board of directors, with the appointment of Ibrahima Diouf, a seasoned finance professional with over 30 years of experience, as the new chairman. He replaces Vincent Le Guennou, who now leads an investment fund focused on African infrastructure for Africa50. Before this appointment, Mr. Diouf was an advisor to the president of BOAD and held various roles, including managing director of EBI SA, the international subsidiary of Ecobank Transnational Incorporated (ETI). He has also worked with Barclays Bank Africa and CBAO in Dakar.

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