Nedbank Group said it intends to use its option to acquire a one-fifth stake in Ecobank Transnational Inc. The price tag for the deal is pegged at over USD 500 million. The South African lender has the option to buy the stake starting next month, although the Old Mutual-controlled bank said it has not yet made a formal decision on the matter.

Nedbank Group Chief Executive Officer Mike Brown said the bank plans to turn a USD 285 million loan it gave to Ecobank two years ago to an 11% stake. Nedbank also has a second subscription right that will enable it to bump up its stake in Ecobank to as much as 20%, Brown added.

Brown told Bloomberg through email, "It is our current intention to exercise our rights. We have always anticipated that the total cost to get to a 20 percent shareholding will be greater than the original loan." Nedbank has a one year window beginning next month to convert the loan to shares.

Togo-based Ecobank is listed on three exchanges in Africa, with operations covering 33 nations in the continent. In the nine months that ended in September, Ecobank said its profits went up 65% to USD 250 million. The bank attributed the increase to the expansion of its businesses in Ghana and Nigeria. Established in 1985, Ecobank also has operations in France, with representative offices in Dubai, Beijing and London.

The largest shareholder in Ecobank is the Public Investment Corp, an agency which overseas over USD 99 billion in assets primarily for government workers in South Africa. In April 2012, Public Investment Corp purchased nearly a 20% holding in the Togolese lender.

Ecobank and Nedbank forged ties in 2008. Ecobank also holds the reciprocal right to purchase a Nedbank stake. However, Chief Executive Officer Thierry Tanoh said six months ago that it could delay its right to exercise the option so that it can concentrate on its businesses.