An Equity Bank outlet in Nairobi. FILE PHOTO | NATION MEDIA GROUP
Equity Group and Atlas Mara expect to review the terms of their
deal in which the Kenyan lender was to acquire from the London-listed
firm four banks in Rwanda, Zambia, Tanzania and Mozambique.
Atlas
Mara was to be paid in the form of Equity shares amounting to a 6.72
percent stake with a current market value of Sh13.6 billion.
The
parties Thursday announced they had not signed a binding agreement for
undisclosed reasons, adding that their continued negotiations will
likely result in a change of the deal terms.
“While
there is no assurance that the potential transaction will be concluded
on the terms previously announced, the parties continue to be engaged in
discussions,” Atlas Mara said in a statement.
While
the parties did not disclose their reasons for failing to reach an
agreement, the pressure to renegotiate the deal is likely the outcome of
a divergence of fortunes of Equity and the four banks it is eyeing.
The
transaction was announced in April last year and since then Equity’s
prospects have brightened with the recent removal of lending rate
controls.
Its share price — the currency with which it was to pay for the
four banks — has gained 32.5 percent since the deal was announcement to
Sh54.2.
The Atlas Mara banks, on the other hand, are making losses in aggregate.
MARKET RALLY
Issuing the same number of shares would have seen Equity pay more in the deal that was initially priced at Sh10.6 billion.
For
Atlas Mara, receiving Equity’s stock valued at the same Sh10.6 billion
would have seen it take fewer shares because of a three-month market
run-up.
In the preliminary discussions, Atlas Mara
agreed to reduce the value of the four subsidiaries by Sh13 billion to
reflect their weaker earnings.
These banking units have
a return on equity (RoE) of approximately two percent, according to
previous disclosures by the multinational.
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