Equity Group now raises stake in its Congo unit to 86pc

Equity Chief Executive James Mwangi. FILE PHOTO | NMG 

By VICTOR JUMA

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Summary

• The new deal values Pro Credit at Sh31.4 billion compared to Sh5.6 billion in 2015, a 460 per cent valuation jump in less than two years.
• It was not immediately clear which group of investors sold their stake to Equity in the latest transaction.
• The Kenyan lender acquired Pro Credit as part of its regional growth strategy.

Equity Group has acquired an extra seven per cent stake in its Democratic Republic of Congo subsidiary for Sh2.2 billion in cash, underlining its confidence about the unit’s future prospects.

The Nairobi Securities Exchange-listed company first acquired a 79 per cent interest in Pro Credit Bank in September 2015 for Sh4.5 billion in a share swap deal that saw the Kenyan multinational issue 70.8 million units of its stock to investors who were exiting the subsidiary.

The latest transaction, which has raised Equity’s interest to 86 per cent, has seen the bank pay a major premium compared to the first transaction.

The new deal values Pro Credit at Sh31.4 billion compared to Sh5.6 billion in 2015, a 460 per cent valuation jump in less than two years.

READ: Equity says it paid Sh4.5bn for Congo bank acquisition

“On September 30, 2016, additional capital of 782,046 new shares with a par value $10 was issued by Pro Credit to Equity Group for a cash consideration of $21 million (Sh2.2 billion),” Equity disclosed in its latest annual report.

It was not immediately clear which group of investors sold their stake to Equity in the latest transaction. In the first deal, the bank bought the shares from German firm ProCredit (61 per cent), Belgian development finance institution BIO (six per cent) and Dutch fund DOEN (12 per cent).

German fund KfW and the International Finance Corporation (IFC) held a 12 per cent and nine per cent stake respectively in Pro Credit at the time and it was not clear if they sold part of their shares to Equity in the latest transaction.

READ: Equity’s lending to Treasury tops Sh100bn after interest rates cap

The Kenyan lender acquired Pro Credit as part of its regional growth strategy. The DRC subsidiary reported a pre-tax profit of Sh501 million in the year ended December, rising 2.58 times from the Sh194 million the year before.

Besides the DRC, Equity also pumped an extra Sh3.1 billion last year to boost its fully-owned South Sudan subsidiary that was hit by economic challenges.

READ: Equity’s half-year profit up by 18pc to Sh10bn amid cuts in lending