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KCB undervalued our share in takeover offer - National Bank board

In Summary

• The board, in the advisory circular to its shareholders said the fair valuation is one KCB share for every 6.23 NBK’s shares and not 1 for every 10 as offered.

 

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

The directors of National Bank of Kenya(NBK) have complained that the KCB Group undervalued the company by almost 38 per cent in the proposed takeover offer.

The board, in the advisory circular to its shareholders, said the fair valuation is one KCB share for every 6.23 NBK shares and not 1 for every 10 as offered.

"Based on the Independent Advisor’s Report, the NBK board is aware that the offer made by KCB falls below the expected valuation range,’’ the circular read in part.

The independent valuation further places NBK’s share at Sh6.10, resulting in an equity valuation for 100 per cent shareholding in the bank’s Sh9 billion.

"The board, however, is aware that so far, no competing offers have been received, which makes it difficult to comment on the best obtainable prices from the market,’’ NBK directors said.

They said KCB’s share value of Sh40.77 in the buyout was reasonable considering the stock is actively traded in the market and the bank is a market leader in the Kenyan banking sector.

The directors also want to include the proposal that NBK will continue to operate as a separate subsidiary of KCB for two years and therefore service delivery to its customers will remain uninterrupted.

‘’I am pleased to present this opportunity to you and in case you have any doubt as to what action to take, it is recommended that you seek independent professional advice,’’ NBK chairman Mohamed Hassan said.

He said the circular which was approved by the Capital Market Authority (CMA) is to assist them to make an informed decision to accept or reject the offer from KCB to acquire the bank.

The board’s reservation on NBK’s share valuation is likely to rally opposition from shareholders and possibly derail efforts to conclude the buyout by end of September.

The issuance of this circular by NBK to its shareholders follows the serving of a takeover document by KCB Group on June 19 which detailed information of the bid.

National Social Security Fund(NSSF)and National Treasury are the biggest shareholders at NBK controlling 48.1 per cent and 22.5 per cent respectively.

In 2016, the pensioner successfully opposed government's proposal to sell part of the bank to a strategic investor to ease its financial constraints.

The lender was looking to raise funds following a botched Sh13 billion cash call from existing shareholders, which was rejected by the government and the Capital Markets Authority (CMA).

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