UK firm to buy out German and French investors in I&M

NAIROBI: A company owned by the UK government has announced plans to acquire a minority stake in I&M Holdings.

The firm, which owns I&M Bank, yesterday said it would sell a 10.68 per cent stake to London-based CDC Group.

The acquisition is subject to regulatory approvals, and would see the exit of German and French investors, DEG and Proparco, respectively.

“The proposed transaction may have a material effect on the value of the shares of the company,” I&M Holdings said early yesterday in a cautionary notice to investors.

Heightened activity

The firm, which has its headquarters in Nairobi, owns I&M Bank Kenya, Giro Bank Kenya, I&M Bank Tanzania, I&M Bank Rwanda, Bank One Mauritius, Burbidge Capital and GA Insurance.

“Shareholders of I&M Holdings are advised that CDC Group Plc has on 14th April 2016 entered into a conditional agreement with two existing shareholders of the companies DEG and Proparco for the sale and purchase of shares ...” the firm said.

CDC Group is the investment arm of the UK’s aid programme, and is wholly owned by the government. It is mainly focused on Africa and South Asia.

The value of the transaction was not immediately revealed, but at the current valuation of I&M Holdings — which is listed at the Nairobi Securities Exchange (NSE) — of Sh42 billion, CDC Group could pay anywhere near Sh4.3 billion for its stake.

The UK firm already has investments in Kenya worth Sh7.4 billion, including being part owners of Garden City Mall along Nairobi’s Thika Highway.

Kenyan businesses form one of the biggest proportions of CDC’s investment portfolio. The group early last year appointed Kenyan-born Murray Grant as its managing director for Africa.

Yesterday’s announcement came amid heightened activity involving capital raising in Kenya’s banking sector, after a tumultuous nine month-period where three banks were shut down.

Chase Bank was placed under statutory management two weeks ago, while Imperial Bank and Dubai Bank were closed last year.

Commercial Bank of Africa (CBA) last week said it has received a Sh2.5 billion loan to shore up its stability. The lender said the 1-year loan was a cross-currency repurchase agreement issued by Standard Bank of Southern Africa (SBSA).

In the transaction, CBA said it would use its Government securities as collateral before buying them back in a deal technically known as a repurchase agreement (repo).

SBSA will gain legal ownership of the collateral instruments, which are basically Government bonds, for the life of the loan.

CBA’s action follows a proposal by the Central Bank of Kenya (CBK) for lenders struggling with liquidity problems, specifically after the collapse of Chase Bank.

“This repo transaction has allowed us to term out our funding by a considerable magnitude, thereby infusing much-needed stability to our balance sheet,” said Raphael Agung, the head of treasury at CBA during the signing function.

CDC Group’s entry also comes just one month after another UK firm acquired a stake in third-tier lender Fidelity Bank.

Duet Private Equity announced in March that it will invest Sh1.9 billion in Fidelity in a mix of debt and shareholding. The transaction was expected to strengthen the lender’s core capital and support its growth strategy.

Another British firm, Old Mutual Holdings, now holds a controlling stake in Faulu Kenya, a micro-lender.

The firms could be hoping to replicate the experience of UK-owned Helios Capital Partners, the principal investors in Equity Bank, who grew the value of their investment in the lender five-fold in just eight years.

Kenya’s banking sector has enjoyed uninterrupted growth for more than two decades, enabling indigenous players to become regional giants.

The rise has been so fast that CBK moved to suspend any new entrants into the sector last year, a measure expected to consolidate the gains and enhance supervisory capacity.

mmichira@standardmedia.co.ke