Equity Group expansion plans to shoot value to Sh694bn

In Summary

• If the deal is sealed, it will spread Equity’s wings into eight countries beyond its current outlets.

• Equity Group will issue 25,482,300 new shares representing 6.27 per cent for the transfer of shares owned by Atlas Mara.

Equity Bank CEO James Mwangi
Equity Bank CEO James Mwangi
Image: FILE

Equity Group plans to acquire four banks operating in Rwanda, Tanzania, Mozambique and Zambia. 

Speaking at the annual general meeting,  chief executive James Mwangi said they have held preliminary talks with Atlas Mara Limited, a London-listed financial service group to swap controlling equity stakes in four of its subsidiaries for ordinary shares in Equity.

These include a 62 per cent stake in Banque Populaire du Rwanda and 100 per cent stake in African Banking Corporation holdings in Tanzania, Zambia and Mozambique.

Equity Group will issue 25,482,300 new shares representing 6.27 per cent for the transfer of shares owned by Atlas Mara in the banks, valued at Sh10.7 billion. The proposed transaction is part of Equity's expansion strategy to serve 100 million customers by 2024.

The lender is the largest financial institution in customer base in Kenya with more than 13.6 million customers and a book value of Sh573.4 billion as at December 2018.

If complete, it could raise this by 21 per cent to mark  Sh693.8 billion of the group’s total assets.

The negotiation is subject to shareholders and regulatory approvals including Central Bank, Competition Authority and Capital Market Authority.

“Through the proposed transaction Equity Group aims to provide access to competitive, tailored financial services to improve livelihoods and deliver significant value to its stakeholders," Mwangi said.

He said shareholders and other investors should exercise caution when dealing in ordinary shares on the Nairobi, Uganda and Rwanda Stock exchanges.

If the deal is sealed, it will spread Equity’s wings into eight countries beyond its current outlets in Kenya, Tanzania, Uganda, South Sudan, Rwanda and Democratic Republic of Congo.

 

Equity will merge operations of Atlas Mara-owed banks with its existing subsidiaries in Rwanda and Tanzania.

“Regional approach has already started to show growth as small banks outside Kenya have been catching up contributing to the group’s earnings,” Mwangi said.

Equity’s net profit for 2018 hit Sh19.8 billion, five per cent growth from Sh18.9 billion in 2017.

At the close of business yesterday, the Group’s shares at the Nairobi Stock Exchange rose by 2.89 per cent to sell at Sh40.90 from previous Sh39.75. The group traded 7.8 million shared valued at Sh319.32 million.

This month, KCB Group Plc the largest lender with Sh714.3 billion in total assets plans to acquire 100 per cent stake at government-owned National Bank of Kenya through a share swap comprising of 10 ordinary shares of NBK for every 1 ordinary share of KCB.

The transaction in talks follows an expected merger entity between NIC Group Plc and Commercial Bank of Africa limited after concluded shareholders’ approvals.

CBA shareholders will own 53 per cent of the new shares in merger, while NIC shareholders own the remaining 47 per cent trading under a new name that will be rolled out before end of September.

“If the acquisitions are driven by market operations and shareholders’ need for synergy, then they will be positive for the industry. This is also a right market for consolidations despite interest caps,” Kenya Bankers Association Habil Olaka said.