Keny­at­tas buy Jamii Bora Bank for Sh1.4bn

Fam­ily ex­pands its em­pire with yet an­other bank buy­out after NIC deal

Business Daily (Kenya) - - FRONT PAGE - Vic­tor Juma [email protected]­tion­ JAMII BORA

Com­mer­cial Bank of Africa (CBA) has made a Sh1.4 bil­lion cash of­fer to buy out Jamii Bora Bank, ex­pand­ing the Keny­atta fam­ily’s busi­ness em­pire which tran­scends bank­ing, dairy, real es­tate, hospi­tal­ity and man­u­fac­tur­ing sec­tors.

The Jamii Bora ac­qui­si­tion bid comes only weeks after CBA an­nounced a re­verse takeover of NIC Group, which is listed on the Nairobi Se­cu­ri­ties Ex­change (NSE).

The com­bined CBA, NIC and Jamii Bora busi­ness will rank as Kenya’s third-largest bank­ing en­tity after KCB and Eq­uity. The three will have to­tal as­sets of about Sh457 bil­lion, ri­valling KCB and Eq­uity, which have as­sets of Sh684.1 bil­lion and Sh560.3 bil­lion re­spec­tively.

CBA is ma­jor­ity-owned by the wider Keny­atta fam­ily, whose mem­bers in­clude Pres­i­dent Uhuru Keny­atta.

Peo­ple fa­mil­iar with the un­der­way trans­ac­tion say CBA will hold Jamii Bora pri­vately and also own a stake in the merged op­er­a­tions of CBA and NIC whose shares will be listed on the NSE.

CBA’S mi­cro­cre­dit busi­ness, M-shwari, is to be spun off to Jamii Bora while CBA/NIC will fo­cus on their main­stay cor­po­rate and SME bank­ing.

“Due dili­gence and ne­go­ti­a­tions have been on­go­ing since last year and the deal is likely to close in a mat­ter of weeks,” said a source who is in­volved in the deal but re­quested anonymity to speak

can­didly. CBA Group chief ex­ec­u­tive Isaac Awuondo de­clined to com­ment on the mat­ter.

The Jamii Bora chief ex­ec­u­tive, Sam Ki­mani, an­nounced his res­ig­na­tion from the lender on Wed­nes­day and was suc­ceeded by his deputy, Tim Kabiru, in an act­ing ca­pac­ity.

At Sh1.4 bil­lion, the buy­out of­fer is a steep dis­count of nearly 60 per cent to Jamii Bora’s last pub­lished book value of Sh3.4 bil­lion in March. The lender has not re­leased its half-year and third-quar­ter financials, hav­ing re­ceived an ex­emp­tion from the Cen­tral Bank of Kenya (CBK) to fa­cil­i­tate the on­go­ing buy­out.

Jamii Bora’s share­hold­ers could get more cash in ad­di­tion to the pur­chase price, con­di­tional on CBA es­tab­lish­ing that the lender is on a firm fi­nan­cial foot­ing post-trans­ac­tion.

“Be­yond the Sh1.4 bil­lion, there is a fur­ther con­sid­er­a­tion based on the bank’s fu­ture per­for­mance,” the source said.

The ad­di­tional pay­out, if it ma­te­ri­alises, will nar­row the cur­rent gap be­tween the bank’s net as­sets and the ini­tial com­pen­sa­tion.

Among the share­hold­ers to be bought out are the EX-CEO, Mr Ki­mani, and his suc­ces­sor, Mr Kabiru, who will get an es­ti­mated com­bined pay­out of Sh238 mil­lion through their in­vest­ment ve­hi­cle, As­ter­isk Hold­ings, which has a 17 per cent stake in the lender.

The duo in­vested in Jamii Bora and took ex­ec­u­tive po­si­tions in the bank in 2011 fol­low­ing their de­par­ture from KCB Group, which im­ple­mented a ma­jor re­struc­tur­ing of its ex­ec­u­tive team at the time.

Pri­vate eq­uity firm Cat­a­lyst Prin­ci­pal Part­ners will get Sh224 mil­lion for its 16 per cent eq­uity while Shore­cap Lim­ited will re­ceive Sh238 mil­lion on its

17 per cent eq­uity. Jamii Bora Scan­di­navia will be paid Sh224 mil­lion for its 16 per cent stake. The bank also has hun­dreds of in­di­vid­ual in­vestors.

It was not im­me­di­ately clear how many of these in­vestors will break even at the ini­tial Sh1.4 bil­lion ag­gre­gate buy­out price.

CBA was able to make an of­fer be­low book value be­cause it ex­pects to in­ject ad­di­tional cap­i­tal into Jamii Bora which, for in­stance, has suf­fered liq­uid­ity short­falls.

The lender’s liq­uid­ity ra­tio stood at neg­a­tive 11.1 per cent in March, far short of the min­i­mum statu­tory re­quire­ment of 20 per cent. This means that its abil­ity to meet short-term obli­ga­tions is sig­nif­i­cantly lim­ited.

The en­try of the deep-pock­eted CBA is ex­pected to change the for­tunes of Jamii Bora, which has con­ducted sev­eral rounds of cap­i­tal-rais­ing in re­cent years to grow in the com­pet­i­tive SME lend­ing seg­ment.

Im­ple­men­ta­tion of in­ter­est rate con­trols has hurt most of the medium and small banks such as Jamii Bora, which re­lied on whole­sale de­posits to lend to in­di­vid­u­als and SMES at rates rel­a­tively higher than the cur­rent max­i­mum of 13 per cent.

Jamii Bora nar­rowed its net losses to Sh51.2 mil­lion in the first quar­ter ended March com­pared to Sh96.2 mil­lion a year ear­lier as in­ter­est in­come plunged 36 per cent to Sh264.9 mil­lion. Its loan book de­clined 15.3 per cent to Sh7.9 bil­lion.

The trans­ac­tions ini­ti­ated by CBA mark a flurry of deal-mak­ing in the bank­ing sec­tor where in­sti­tu­tions have lost the large pre­mi­ums of up to three times the book value they com­manded prior to the in­ter­est rate caps, en­cour­ag­ing op­por­tunis­tic buy­ers to step in with res­cue and growth cap­i­tal in­jec­tions.

Pri­vate eq­uity firms Africin­vest and Cat­a­lyst Prin­ci­pal Part­ners, for in­stance, last month ac­quired a 24.2 per cent stake in Prime Bank for $50 mil­lion (Sh5.1 bil­lion) at book value.

For­mer Jamii Bora CEO Sam Ki­mani.

Act­ing Jamii Bora CEO Ti­mothy Kabiru.


BUY­OUTA Jamii Bora Bank branch in Nakuru.

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