Mr Diamond, the former chief executive of Barclays, wanted to increase the war chest of his Atlas Mara cash shell for more acquisitions in the African banking sector. But the fund, which secured $325m in December through an initial public offering on the London Stock Exchange, is set to fall short of the $400m target set for the second fundraising, securing instead in excess of $300 million.
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"It is not where they thought they were going to be," said one person familiar with the situation. Another person confirmed the $400 million would not be reached, but said that Mr Diamond received strong support from the current shareholder base.
Mr Diamond was ousted from Barclays in 2012, after the bank was fined for manipulating the Libor interbank lending rate.
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The setback will not torpedo the deals that Atlas Mara has already secured, however. The vehicle announced its first deal in March, paying $265m in cash and shares to buy BancABC, a medium-sized lender with operations in Botswana, Mozambique, Tanzania, Zambia and Zimbabwe, and a small stake in Union Bank of Nigeria. The vehicle also signed a deal to buy a majority stake in the Development Bank of Rwanda through its privatisation.
After failing to reach its fundraising target, Atlas Mara could raise debt in the next few months, rather than equity, to finance acquisitions. Mr Diamond has made clear that the acquisition spree was not over, saying in March: "This is the beginning . . . Watch this space."
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Rival bankers and investors believe that Atlas Mara's next acquisition is likely to be in the prized – but expensive – west African market, home of Nigeria, the continent's largest economy.
Sub-Saharan Africa is attracting bankers because most of the region's population of about 1bn do not use banking services. Only a quarter hold a bank account and fewer than 5 per cent have a credit card. At the same time, though, the region is enjoying its best economic expansion in a generation.
Mr Diamond set up Altas Mara last year in partnership with Ashish Thakkar, the 32-year-old head of Mara Group, a conglomerate with operations in 19 African countries. Mr Diamond and Mr Thakkar personally invested $20m in the venture and they invested again more funds in the second fundraising.
Atlas Mara declined to comment.