MPs yesterday began investigating "underhand dealings" in the proposed takeover of the National Bank of Kenya by the Kenya Commercial Bank.
The lawmakers are concerned that the bank is being sold at Sh6 billion, much lower than its Sh9 billion-Sh15 billion valuation.
The NBK is in dire need of Sh6.1 billion to settle its Sh13 billion liabilities, having secured Sh6 billion as committed by the prime shareholders NSSF and National Treasury.
The committee on finance chaired by Joseph Limo (Kipkelion East) said that the takeover was being rushed "in a bid by management to run away from their mistakes".
The committee wants to know who between KCB and NBK initiated the takeover and whether shareholders will get value for their money in the process.
The lawmakers claimed that the takeover is driven by forces out to reap from the windfall from the sale and accused the management of stripping the bank of its assets.
MPs Jimmy Angwenyi (Kitutu Chache North), Samuel Atandi (Alego Usonga), Kuria Kimani (Molo), Mohamed Ali (Nyali), Chris Omulele (Luanda), Edith Nyenze (Kitui West), Mboni David (Kitui Rural), Waihenya Ndirangu (Roysambu), Adipo Okuome (Karachuonyo), and Shakeel Shabbir (Kisumu East) were present.
They accused the bank’s management of acting dishonestly in handling the proposed takeover, especially after revelations that the bank’s books are not reviewed by Auditor General Edward Ouko.
“Is it possible that the management, during the sale of assets, knew they’d offer the bank out for a hostile takeover deliberately for their own gains?” Waihenya asked.
“It is unfair that the management cannot explain the amount of money in the offerors’ statement. The information is not alien to them. Publicly, they want to show the process as transparent, but under the table, they are selling the bank out … they are undressing the bank to the offeror they want instead of opening the process to other bidders,” the lawmaker said.
Chairman Limo said the management was not being realistic in its claim that the government has no say in the bank yet NSSF has 48 per cent shares and National Treasury has 22 per cent.
“Why are you calling an AGM to discuss the takeover price yet you have no offer? How can you set up a meeting before agreeing with the acquiring entity?” he asked.
“What is the position of the board on this matter? Does it mean it has no control over the takeover plan? What oversight are they doing? Which type of board is this?”
“There is a lot of information under the table. There are fears there is a hidden hand at the Treasury or at NSSF that is behind the takeover,” Limo added.
This was after NBK CEO Wilfred Musau said the bank has no information on the takeover value, noting that they are waiting for the Capital Markets Authority to give its report on the offeror’s (KCB) statement.
He said the bank received a letter of intention from KCB in April followed by the offeror statement issued on May 6.
“We have an offeror statement which KCB published, but [it] doesn’t have details other than the conversion rate for shares and potential merger structure.”
“No final approval has been granted. We are not in the business of stripping the bank. The shareholders have the final say in the decision,” Musau said as the MPs sought more clarification on the board’s position.
Habil Waswani, NBK director, legal affairs, allayed the MPs’ fears saying the process is well-regulated.
“The takeover offer document is what contains the details of the acquisition. It is the main document and is currently before the CMA,” he said.
The NBK management was put to task on whether there was stakeholder participation before the takeover process began and whether the board was in support.
The committee heard that the bank intends to convert the preference shares to ordinary shares, a matter that MPs protested.
“We will only agree to convert the preference shares in the event that we will close the transaction with KCB,” a transaction adviser – Pacific Capital, taken on board by NBK to oversee the sale, said.
On this, NBK CEO said, “There is a very good rationale for the preference shares to be converted. We insist that this should be so if the same translates to cash.”
The committee further argued that in the event the takeover fails, there will be enormous challenges owing to the anxiety that the process would spark.
“There is a big risk in the event KCB does not conclude the transaction. The problem is not management trying to sell the bank but capital. If the bank continues to work as undercapitalised, there will be ramifications. Our main concern is how such a scenario would impact on the depositors,” Musau said.
Past missteps taken by the bank also returned to haunt the managers with MPs seeking clarification on whether the past sale of assets bore any proceeds.
(Edited by O. Owino)
