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Claims of bias in Republic’s bid to take over HFC

Wednesday, August 6, 2014

As the legal battle continues over Republic Bank’s attempt to take over HFC Bank Ghana, questions have been raised about the role of Ghana’s Securities Exchange Commission (SEC) in the matter. 

HFC Bank’s managing director Asare Akuffo has reportedly accused the SEC of bias in its handling of Republic Bank’s efforts to take over the bank. He claimed in a recent interview that the SEC gave Republic Bank the go ahead for a mandatory takeover without any reference to the Bank of Ghana, the primary regulator, contrary to the SEC’s own rules.

HFC Bank has filed a lawsuit in Ghana’s High Court accusing Republic Bank of insider trading among other serious claims. The T&T bank, which currently owns a 40 per cent stake in HFC Bank, has been trying to increase its ownership to 51 per cent to gain controlling powers over the Ghanaian bank. It has planned to finalise the takeover by December but recent legal action has stalled those efforts.

On May 23, HFC Bank sued Republic Bank and the SEC for what it alleged were breaches of the SEC Code on Takeovers & Mergers. It also applied for an interim injunction against Republic Bank and the SEC. Republic Bank countered by filing an application to strike out the court action altogether. However, the court dismissed the application and awarded costs against the T&T bank.

Republic Bank first purchased 8.79 per cent shares in HFC Bank Ghana for US$8 million in December 2012 after invitations from the commercial arm of the World Bank, the International Finance Corporation (IFC). The bank bought the stake when HFC floated 112,420,246 ordinary shares under a private placement.

Republic Bank's stake further increased to 32.02 per cent after buying 23.23 per cent additional shares previously held by Aureos Africa Fund LLC. In June 2013 the bank acquired 68,854,703 ordinary shares at no par value from Aureos Africa Fund LLC. It further acquired 7.98 per cent additional shares from Union Bank of Nigeria, increasing its shareholding in the bank to the current 40 per cent.

Republic Bank has so far invested over US$40million in requiring shares in HFC Bank, and its future investment could be in the order of US$100million. 

In November of 2012, Republic Bank Limited and HFC Bank (Ghana) agreed to the framework for the investment by Republic Bank in HFC Bank. The agreement, provided that Republic Bank would not increase its shareholding in HFC Bank beyond 40 per cent for a period of one year without the prior approval of HFC’s board of directors. Akuffo has accused Republic Bank of breaching that agreement.

Akuffo, who owns 0.3 per cent stake in the bank, has expressed concern about how Republic Bank made mandatory offers to HFC Bank shareholders. 

HFC Bank was formed in 1990 and was listed on the Ghana Stock Exchange in 1995. It operated as an independent mortgage finance institution until 2003 when it was licensed as a commercial bank. HFC Bank currently operates 26 branches throughout Ghana, providing a range of banking services, including mortgages and real estate services, commercial banking, investment banking, microfinance, private equity and venture capital fund management.

It was instrumental in the development of the mortgage industry in Ghana and has an asset base of US$301 million and profit after tax of US$7.7 million based on its last published financials.


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