United Bank for Africa, one of Nigeria’s leading financial institutions, is set to cancel 2,080,194,955 shares held by its staff members in a bid to trim the number of shares issued by the Bank.
The shares that will be cancelled are held by its staff under the Staff Share Investment Trust Scheme which allows staff members to become part owners, like ordinary shareholders of the bank.
“The transfer of shares from the SSIST was part of a special resolution passed by shareholders at the bank’s Annual General Meeting held on April 8, 2016,” said Billi Odum, UBA’s Company Secretary.
The shares expected to be cancelled represent approximately 6% of the Bank’s share capital.
Nairametrics argues that though a company cannot buy back its shares in Nigeria, it can, however, work its way around that by cancelling the shares after purchase. This argument may explain the reasoning behind this move by UBA.
A compensation in the region of N9.47 per share is expected to be paid for the cancellation, amounting to about N20.8 billion ($64 million).
Shareholders will also profit from this transaction in the further as a reduced number of shares issued mean greater earnings per share for those invested in the Bank.