Equity Bank builds Sh20bn war chest for Africa buyouts

Money Markets

Equity Bank chief executive James Mwangi at a past function in Nairobi. The bank has created 400 million shares with a current market value of Sh20.9 billion, boosting its war chest for acquisition of lenders across the continent. PHOTO | FILE 

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• Equity Bank has previously stated its interest in entering neighbouring countries Ethiopia, the war-ravaged Somalia, and the Democratic Republic of Congo.
• The management sees DRC as an attractive economy that can offer opportunity for long-term growth due to its vast mineral wealth and rising population.
• Last year, Equity head hunted Anthony Kituuka from its rival KCB to be executive director in charge of regional subsidiaries.

Equity Bank has created 400 million shares with a current market value of Sh20.9 billion, boosting its war chest for acquisition of lenders across the continent through share swaps and private placement.

The bank will, at a shareholders’ meeting scheduled for Tuesday, seek approval for creation of an extra 411,419,668 shares that it sees as a key plank in its strategy of transforming into a Pan-African lender through rapid expansion across the continent.

Equity shares are currently trading at Sh51 per unit at the Nairobi Securities Exchange (NSE), putting the value of the new stock at Sh20.9 billion-- equivalent to a tenth of the lender’s market capitalisation.

“The board, subject to obtaining all requisite regulatory approvals, be and is hereby authorised to allot and issue the shares created in a series of transactions by way of private placements in share swap arrangements to facilitate acquisition of the subsidiaries,” reads part of the shareholders’ meeting agenda.

The value of Equity Bank’s stock acquisition war chest could, however, differ substantially from the Sh20.9 billion indicative market price, depending on the rate at which it allocates the shares to buyout targets.

Companies ordinarily discount their shares during stock-financed buyouts to sweeten the deal for the firms they intend to acquire.

Attempts to reach Equity Bank chief executive James Mwangi or his personal assistant to comment on the plans were not successful.

The management of the bank, ranked as Kenya’s most profitable, will be asking shareholders to approve acquisition of subsidiaries in Africa “undertaking businesses similar to Equity’s.”

“The board of the company be and is hereby authorised to approve the terms of such acquisitions and enter into agreements in order to undertake such acquisitions,” reads the agenda.

Regional expansion

Equity Bank has previously stated its interest in entering neighbouring countries Ethiopia, the war-ravaged Somalia, and the Democratic Republic of Congo.

The management sees DRC as an attractive economy that can offer opportunity for long-term growth due to its vast mineral wealth and rising population.

Ethiopia may prove to be a difficult market to enter with existing government regulations locking out foreign-owned banks, but the country’s leadership has recently showed signs of loosening up as it seeks to quicken economic growth and create jobs for its more than 90 million citizens.

Last year, Equity Bank head hunted Anthony Kituuka from its rival KCB to be executive director in charge of regional subsidiaries.

The lender currently operates in Uganda, Tanzania, Rwanda and South Sudan. The regional operations contributed Sh1 billion to its bottom line last year, up from Sh245 million a year earlier