FMDQ Group, Nigeria’s leading market for fixed income securities and forex and operators of FMDQOTC has reached an agreement to acquire over 20% of the Central Security and Clearing System (CSCS) with the value of the transaction currently undisclosed.
According to sources with knowledge of the transaction, the FMDQ Group will buy out shares owned by Leadway Insurance and from Artemis Ltd., a vehicle owned by Verod Capital.
The two entities own 16.6% and 5% respectively delivering a combined 21.6% ownership of CSCS.
The deal is subject to the approval of the Securities & Exchange Commission and the Federal Competition and Consumer Protection Commission (FCCPC).
The transaction is expected to deepen capital market operations and enhance competition amongst exchanges, with both outcomes viewed as good for consumers and businesses.
Having the FMDQ on board supports the 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.
FMDQ is already one of Africa’s leading 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.
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.
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 costs FMDQ over N17 billion without adding an off-market premium, which is typically associated with such deals, CSCS market valuation is over N85 billion.
CSCS currently (as of December 2020 annual report) has 6 shareholders with over 5% ownership and this includes the Nigerian Exchange Group (29.19%). Access Bank (7.5%), UBA (5.37%, Artemis Ltd (16.6%), Ess-ay Investments Ltd (10%) and Leadway Insurance (5%).
CSCS reported revenue of N12 billion in 2020 compared to N9.2 billion a year earlier while also reported profit after tax of N6.9 billion compared to N4.9 billion a year earlier. The company also paid a dividend of N5.85 billion in 2020 or N1.17 per share (2019: 86 kobo).
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