Competition Authority gives conditions for CBA-NIC merger

The Competition Authority of Kenya (CAK) has approved the proposed merger between Commercial Bank of Africa Limited (CBA) and NIC Group following the approval of shareholders from both parties.

This gives leeway for NIC to issue new shares to CBA bank shareholders and upon completion, CBA's holding will amount to about 52 per cent in the new entity.

The Authority however emphasised that the merger will be approved on condition that no employee is declared redundant within a year of the transaction.

Thus becoming the second largest bank with a market share of 10 per cent, four points behind KCB and the largest transaction in Kenya's banking history.

However, it is anticipated that the merged entity will continue facing competition from Tier 1 banks who, together, control 55.32 per cent of the market.

CAK has also noted that the proposed merger is unlikely to raise competition concerns but is likely to lead to negative public interest concerns.

“The Authority considers the following public interest concerns during merger analysis; extent to which a proposed merger would impact employment opportunities; impact on competitiveness of small and medium enterprises (SMEs); impact on particular industries/sectors; and impact on the ability of national industries to compete in international markets,” read part of a report by the CAK.

Based on this criteria, the Authority noted that the merged entity will have a staff compliment of 1,872 employees and consequently approved the merger on condition that none of these employees are declared redundant for a period of 12 months from the date of closing of the transaction in Kenya.

“The decision was informed further by the parties’ indication that no Branch closure is anticipated except in locations where there are overlaps. Also, where overlaps exist, the merging parties indicated that they intend to open new branches in other locations,” said the Authority.

Consolidation in the banking industry has been on an upward trend with tier one banks acquiring the small banks across the region.

Recently, KCB issued an acquisition proposal to National bank which if successful, the latter will acquire full control of the target.

Equity bank is also eyeing its expansion in East Africa with the acquisition of Atlas Mara Limited which operates in Rwanda, Zambia, Mozambique, and Tanzania.

Analysts foresee more of these consolidations bearing in mind the tight interest rate regime in Kenya which has seen banking earnings flatten since 2016.

This transaction has been approved on condition none of the 1872 employees of the merged entity shall be declared redundant for one year after completion of the deal.