PEs eye Kenyan firms crippled by coronavirus

The Nairobi Securities Exchange trading floor. FILE PHOTO | NMG

By BRIAN NGUGI
More by this Author

Summary

• Coronavirus-fuelled lockdowns and a major shift toward working from home have hit many Kenyan firms hard leading to massive layoffs and shutdowns.
• Distressed companies are often seen as attractive acquisition targets.
• Their stock and debt often trade at prices reflecting the difficulties they face, and may be under pressure to sell assets, business or securities quickly to raise capital or pay down debt.

Several distressed Kenyan firms in the Covid-19 hit travel, entertainment, energy and financial sectors could be snapped up by private equity (PE) funds eyeing quick bargains, Japanese law firm, Anderson Mori & Tomotsune said.

“The Covid-19 outbreak has had a significant impact on global markets, adversely affecting both demand and supply. The pandemic has meant that some corporations are in financial distress because of the crisis, and may have to merge with or be taken over by other firms,” it said in a Kenya focused market update.

“We also expect there to be a wave of restructuring and business rescue applications by companies unable to survive in their present form.”

Coronavirus-fuelled lockdowns and a major shift toward working from home have hit many Kenyan firms hard leading to massive layoffs and shutdowns.

Distressed companies are often seen as attractive acquisition targets. Their stock and debt often trade at prices reflecting the difficulties they face, and may be under pressure to sell assets, business or securities quickly to raise capital or pay down debt.

Banks restructured loans worth Sh1.12 trillion or 38 per cent of the total industry loan book by the end of August to cushion their customers from the coronavirus-induced economic hardships that had hurt their ability to repay.

Some of the recent merger and acquisitions activity cut across key sectors including financial services, renewable energy and technology. The latter part of 2019 was characterised by significant deals in the banking sector. This is expected to intensify.

KCB acquired the troubled National Bank of Kenya (NBK), Egypt’s public listed Commercial International Bank concluded its acquisition of a controlling stake in Mayfair Bank, and Nigerian lender, Access Bank PLC acquired a 100 percent stake in Kenya’s Transnational Bank.

There was also the merger of NIC Group and Commercial Bank of Africa. Meanwhile Rubis Energie SAS, a subsidiary of Rubis SCA, a French international firm acquired previous stock exchange listed firm, KenolKobil.