Mwalimu Sacco’s plans to acquire Equatorial bank put on hold

Corporate News

Mwalimu Sacco had made a Sh2.5 billion offer for a 51 per cent stake in Equatorial Commercial Bank owned by billionaire businessman Naushad Merali. FILE PHOTOS |   NATION MEDIA GROUP

By DAVID HERBLING, hdavid@ke.nationmedia.com

In Summary

• The Industrialisation and Enterprise Development ministry, the State department that is in charge of cooperative societies, stopped the deal in the wake of emerging queries on its financial fitness.
• The ministry has raised queries on the valuation, profitability and corporate governance at ECB, asking for a higher degree of clarity before the bid is allowed to proceed.
• Sasra has also weighed in with a letter stopping the transaction and faulting Mwalimu for pursuing the deal without notifying it or seeking regulatory approval.

Kenya’s largest savings society Mwalimu Sacco’s bid to acquire a majority stake in Equatorial Commercial Bank (ECB) has hit a bump after it was stopped pending a fresh audit of the deal.

The Industrialisation and Enterprise Development ministry, the State department that is in charge of cooperative societies, stopped the deal in the wake of emerging queries on its financial fitness.

The Sacco had made a Sh2.5 billion offer for a 51 per cent stake in the bank owned by billionaire businessman Naushad Merali.

READ: Mwalimu Sacco seeks 50pc of Merali bank

The Industrialisation ministry headed by career banker Adan Mohammed last week wrote to Mwalimu Sacco asking it to suspend the acquisition bid and immediately submit a due diligence report that informed the investment decision.

In its letter to the Sacco, the ministry has raised queries on the valuation, profitability and corporate governance at ECB, asking for a higher degree of clarity before the bid is allowed to proceed.

“You are required to furnish this office with the due diligence and feasibility study report on the said Equatorial Commercial Bank,” the ministry says in a letter signed by Patrick Musyimi, the Commissioner for Co-operative Development.

“In addition, you should not make any financial commitment on the investment before getting approval from this office and Sasra,” Mr Musyimi says in the letter dated September 25.

The Sacco Societies Regulatory Authority (Sasra) has also weighed in with a letter stopping the transaction and faulting Mwalimu for pursuing the deal without notifying it or seeking regulatory approval.

“You are advised not to engage in any of the proposed investment activities along the lines proposed to the delegates unless the Sacco society has sought and obtained an express approval from the authority in respect thereof,” Sasra says in a strongly-worded letter signed by its chief executive Carilus Ademba.

The directives, meant to protect the wealth of Mwalimu Sacco’s 57,277 members, pours cold water on the unprecedented takeover of a Kenyan bank by a savings and credit union.

Mwalimu Sacco draws its membership mostly from high school teachers and their spouses as well as education sector employees such as Teachers Service Commission (TSC) staff.

The society held a special shareholders meeting on September 13, 2014 where the proposal to purchase a 51 per cent stake in ECB was approved.

Industrialisation ministry officials are particularly concerned that Mwalimu Sacco chief executive Robert Shibutse, who was hired in June, also serves as a non-executive director at ECB.

READ: Mwalimu Sacco taps Equitorial Bank executive for CEO