The FMDQ Group, Nigeria’s main fixed income securities and currency market, and the operators of FMDQOTC have agreed to buy over 20% of CSCS. The transaction’s value is currently undisclosed.
According to individuals familiar with the transaction, the FMDQ Group will purchase shares from Leadway Insurance and Artemis Ltd, a Verod Capital vehicle. The two entities each control 16.6% and 5% of CSCS, for a total ownership of 21.6 percent.
The Securities and Exchange Commission and the Federal Competition and Consumer Protection Commission must both approve the deal (FCCPC). Nairametrics understands that regulators are pleased about the transaction because it is likely to deepen capital market operations and increase competition among exchanges, both of which are good for consumers and companies.
Shareholders and Investors in CSCS are likely to view the deal as a positive development for the capital market considering the experience and pedigree of a shareholder like FMDQ.
FMDQ acquisition of major shares in CSCS provides the latter with a strong shareholder with enough experience, capacity, and capital to help drive growth in an increasingly changing capital market that requires significant investment in technology and manpower.
Having the FMDQ on board also supports CSCS drive to increase revenues from its core depository, clearing, and settlement business as well as provide it with the right partner in its quest to seek new growth opportunities especially on the enterprise front. CSCS makes most of its money from transaction fees and its depository business.
Some market participants who spoke to Nairametrics opine this deal could expand the revenue base of the CSCS, leveraging on FDMQ economies of scale to secure lucrative deals that will provide improved shareholder returns. CSCS has often relied on its investment income to shore up revenue especially when there is a prolonged bearish stock market where demand for equities falls.
FMDQ is already one of Africa’s leading Africa’s financial market infrastructure groups with ownership in a host of companies offering services that are vertically integrated into the financial market system. This deal appears to align with the company’s core vision and could propel CSCS as one of the leading clearing, depository, clearing, and settlement companies in Africa.
This is yet another deal that will excite investors in a Nigerian capital market that has seen a flurry of corporate transactions being announced in the last quarter of 2021. Shares of CSCS currently trade on the NASDOTC and have gained over 183% in the last year and could surge as is typical with deals like this.
Deals like this are a welcome development, especially where the investors are experienced with skin in the game. FMDQ also has deep pockets with over N329 billion in balance sheet size including N27 billion in cash. At the current share price of N17 per share, the deal cost FMDQ over N17 billion without adding an off-market premium which is typically associated with such deals, CSCS market valuation is over N85 billion.