DECLINED

Court dismisses bid to stop National Bank takeover

In Summary

• Evans Aseto and John Kiptoo who moved to court questioning the legality of the deal wanted the transaction stopped.

• In its ruling, the court determined that the petition lacked merit as it failed to understand the independent legal framework for the acquisition of shares in publicly listed companies.

The National Bank of Kenya along Harambee avenue
The National Bank of Kenya along Harambee avenue

The High Court has dismissed a petition challenging the acquisition of National Bank of Kenya by KCB Group.

Evans Aseto and John Kiptoo who moved to court questioning the legality of the deal wanted the transaction stopped.

The two argued that the share swap and transfer was irregular as there had been no public participation contrary to constitutional requirements.

They contend that since the National Treasury and National Social Security Fund have up to 50 per cent of the shareholding in NBK its transfer ought to be subjected to public participation.

The planned share swap follows offer by KCB on April 18 to acquire 100 per cent shares of NBK by way of share swap of ten ordinary shares of NBK for one shares of KCB.

Both KCB and NBK shareholders have already approved the deal.

However, the two applicants argued that if the acquisition is allowed to proceed, issues like staff welfare would be left hanging.

“We are apprehensive that the acquisition of 1st respondent by the 2nd respondent will occasion the loss of jobs to may Kenyans under the employment of respondents as there is high likelihood that various positions will be declared redundant,” the two argue in their suit. 

In its ruling, the court determined that the petition lacked merit as it failed to understand the independent legal framework for the acquisition of shares in publicly listed companies under the Capital Markets Act and the Capital Markets (Take-overs and Mergers) Regulations 2002.

The court stated that the transaction is “strictly in accordance with the law including statutory confidentiality, other than information, required to be provided by law.”

While the two argued that details on the acquisition were scanty, an indicator of the clandestine manner in which the merger is being handled, the court determined that CBK as the regulator had clear provisions under the Banking Act and it’s Prudential Guidelines for approval.

“However these provisions have yet to be invoked by the transacting parties, at this stage of the transaction,” the ruling read.

The court also determined that National Bank employees would be dealt with in strict accordance with the law, under the Employment Act.

Last week, Treasury defended the multibillion-shilling takeover of NBK after the National Assembly opposed the merger.

In a statement to media, acting Treasury CS Ukur Yattani said the government, through the National Treasury and NSSF, is a principal shareholder in the two banks and supports the need for a stronger bank.

"The government as a shareholder has been engaged in the process. In our strategic role, we recognise the need for strong and stable banks for our fiscal responsibilities," Yattani said.

Parliamentary Finance and National Planning Committee on Wednesday tabled a report opposing the takeover, instead proposing a recovery plan for NBK.

The committee led by Kipkelion East MP Joseph asked NBK's principal shareholders - the National Treasury (22.5 percent) and the National Social Security Fund (NSSF) (48.05 per cent) to reject KCB's offer to acquire 100 per cent shareholding.