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BUY-OUT

Team set up to speed National Bank takeover by KCB

In Summary

•The team is expected to mitigate transitional risks and make the necessary preparations to enable a smooth transition.

KCB chief executive Joshua Oigara on March 2. Photo/Enos Teche.
KCB chief executive Joshua Oigara on March 2. Photo/Enos Teche.

KCB Group and National Bank of Kenya have set up a project team comprising of staff from both lenders to smoothly carry out the banks’ proposed share swap.

KCB intends to acquire up to 100 per cent of the ordinary shares of NBK through a share swap of one (1) ordinary share of KCB for every ten (10) ordinary shares of the NBK with a par value of Sh5.

The team to be led by the KCB Group managing director Joshua Oigara is expected to mitigate transitional risks and make the necessary preparations to enable a smooth transition.

“This transaction fits within KCB’s expansion strategy and gives it a stronger edge to play a bigger role in driving the financial inclusion agenda in the East African region,” Oigara said.

The formation of a joint project team is coming just days after NBK board issued a 14-day cautionary notice to shareholders after receiving the take-over document from KCB last week.

According to a precautionary notice published on Friday, the Capital Market Authority (CMA), the listed lender will have to be delisted upon acceptance of the offer by not less than 75 per cent of offer shares.

The takeover also awaits conversion of 1.13 million preference shares in the capital of the firm to new ordinary shares of similar amount and final approvals from Central Bank, Competition Authority and Capital Market Authority.

The buyout bid has since received unanimous backing from shareholders of both institutions and that of the regulator, Central Bank of Kenya.

Early this month, CBK Governor Patrick Njoroge told a Parliamentary Finance and National Planning Committee that NBK faces imminent collapse if it is not taken over by KCB Group in the proposed merger.

“NBK isn’t a small institution and letting it collapse will be disastrous to its over 650,000 customers and the financial sector at large,” Dr Njoroge told the Finance and National Planning Committee of the National Assembly.

The principal government bank has been struggling for the past three years, posting a 98.3 per cent drop in profits for the year ended December 31, 2018.

The bank had earlier in March issued a precautionary statement warning of a substantial decline in profit.

NBK will be operated as a standalone subsidiary of KCB Group for a period of two years post-acquisition and thereafter fully integrated into KCB Bank Kenya.

However, it recently recorded an after tax profit of Sh106 million in Q1 2019, 138 per cent improvement compared to similar period last year.

Although the acquisition process has been smooth since KCB announced the takeover bid in April, Evans Aseto and John Kiptoo moved to court early this month to block the take-over, arguing that the share swap is irregular as there has been no public participation.

The High Court however declined to suspend the process but certified the matter as urgent and directed the matter be heard between the parties.

The case will be heard on Wednesday.