KCB Group to Acquire All Shares of National Bank of Kenya

NAIROBI (Capital Markets in Africa) – KCB Group Plc, Kenya’s biggest lender by assets, plans to acquire state-owned National Bank of Kenya Ltd. through a 10-for-one share swap.

If approved, the deal will be the second banking tie-up offer in East Africa’s largest economy in less than five months after NIC Group Plc and Commercial Bank of Africa Ltd. proposed a merger. The consolidation is in line with the central bank’s aspirations for a stronger banking sector.

Shares of NBK, as the lender is known, surged 25 percent to 5.50 shillings ($0.05), the biggest gain in 15 years, with 1.1 times of the three-month average volume being traded. KCB dropped 0.1 percent to 44.90 shillings on a volume equivalent to 2.2 times of the three-month average by close of trading in the capital, Nairobi.

The offer is subject to conversion of 1.14 billion non-cumulative preference shares of 5 shillings each of NBK into ordinary shares at a ratio of one-for-one, KCB said Thursday in an email distributed by the Nairobi Securities Exchange.

“If acceptances of 75 percent of the offer shares are received, and subject to approval from the Capital Markets Authority, the offer shares will be delisted from the NSE,” according to the statement. KCB will move to compulsorily acquire the remaining shares of NBK when acceptance reaches 90 percent, it said.

In December, NIC Group and CBA announced talks to create a lender that would rank as the country’s third biggest by market capitalization. This week, the investors of both lenders accepted the proposed merger, the biggest such deal in Kenya in at least a decade.

“The proposed transaction will further consolidate the banking sector in Kenya and will create stronger institutions enabling KCB to play a bigger role in the financial inclusion agenda,” KCB Chief Executive Officer Joshua Oigara said in an emailed statement. “The acquisition would accelerate the group’s growth ambitions and enhance value to all stakeholders.”

NBK’s book value per share stands at 20.58 shillings, while the share price of 5.50 shillings, meaning KCB “stands to acquire NBK at a discount of 78.7 percent on the current price,” Linda Kiraithe, an analyst at Nairobi-based Apex Africa Capital Ltd., said in an emailed note.

“We anticipate that KCB will also benefit from transnational accounts held by the government and government agencies in NBK,” she said.

Source: Bloomberg Business News