Britain's CDC closes acquisition of I$M stake

Corporate News

I&M Bank Muindi Mbingu Street branch in Nairobi. PHOTO| FILE 

By BRIAN NGUGI, @brian_ngugi bnjoroge@ke.nationmedia.com

In Summary

• DEG is also a shareholder of Chase Bank, which is under receivership, where it holds a 6.6 per cent stake purchased in 2013. Proparco is listed as a senior debt lender to Chase with a credit line worth $40 million.
• CDC has had transactions with Kenyan banks in the past, having provided capital to Equity Bank, Co-operative Bank, Jamii Bora Bank and Chase Bank either through debt and equity.

I$M Bank said Tuesday it has concluded an acquisition deal with British firm CDC after fulfilling the necessary conditions.

CDC agreed to fully buy out German and French development finance institutions, DEG and Proparco, who hold a combined 10.68 per cent stake setting the stage to become the fourth largest owner of I&M.

“Further to the cautionary announcement on 18th April 2016 in respect of the proposed acquisition of approximately 10.68 per cent of the issues ordinary shares by CDC Group Plc, I&M Holdings is pleased to inform its shareholders and the investing public that the all the conditions precedent to completion of the acquisition of the sale shares have been fulfilled and the acquisition of the sale shares was completed on 30 September 2016,” said I&M in a regulatory notice.

The sale to the UK government-owned agency was done through a private transfer rather than in the open market at the Nairobi Securities Exchange (NSE). The deal was subject to approval from Kenyan and Tanzanian regulators.

READ: British firm gets veto power in I&M

The private transfer allowed the seller to load a premium on the prevailing market price. DEG owned 6.25 per cent of I&M through a nominee account while Proparco held a 4.43 per cent stake in the bank.

CDC Group plc. on April 14, 2016 entered into a conditional agreement with two existing shareholders of the company, DEG and Proparco, for the sale and purchase of shares comprising approximately 10.68 per cent of the company’s issued share capital as a private transfer.

CDC has had transactions with Kenyan banks in the past, having provided capital to Equity Bank, Co-operative Bank, Jamii Bora Bank and Chase Bank either through debt or equity.

Under receivership

DEG is also a shareholder of Chase Bank, which is under receivership, where it holds a 6.6 per cent stake purchased in 2013. Proparco is listed as a senior debt lender to Chase with a credit line worth $40 million.

DEG and Proparco initially invested in 2007 an estimated $4.5 million to acquire a combined 11.96 per cent shareholding in I&M Bank, before growing their combined stake to 19.7 per cent after injecting Sh1.2 billion in the bank.

In January 2013, they sold nearly half of their stake in the bank at an estimated Sh3.6 billion, cutting their combined stake to 10.68 per cent which they have held since.

The 2013 sale brought the two firms a 125 per cent return on their initial investment even as they were left with shares worth Sh4.2 billion based on I&M’s set valuation of Sh40 billion at the time.

The sale also came ahead of the lenders’ listing at the Nairobi bourse in June 2013, which would result in major shareholders being locked in the company for a two-year period that lasted until June last year.

DEG and Proparco’s exit also comes at a time when there is expectation of an increase in equity buys in Kenyan banks due to a freeze on licensing new lenders and expected consolidation in the sector following the collapse of Chase Bank, Imperial Bank and Dubai Bank.