Category Archives: Equity Bank

M&A Moment: November 2019

A roundup of East Africa merger deals announced, ongoing, or completed in the latter half of the year 2019. Most are drawn from approval decisions from the Competition Authority of Kenya (CAK Kenya).

The deals include:

Airline/ Oil/Energy/Mining M&A

  • The CAK authorized the proposed acquisition of 863,477 Series B preferred shares in Windgen Power USA Inc. by Omidyar Network Fund LLC, Acumen Fund Inc., Stitching DOB Equity and Microgrid Catalytic Capital Partners.
  • Rubis, having completed the takeover of Kenol, are now going after Gulf Energy, the fourth-largest fuel marketer in Kenya with 46 stations.
  • A bid by the owners of IberAfrica, Kenya’s largest thermal power producer, to sell the company to a South African energy firm has collapsed. Read more.

Banking and Finance: Finance, Law, & Insurance M&A

  • The CAK approved the proposed merger between Commercial Bank of Africa and NIC Group on condition that they retain 1,872 employees for a period of 12 months. Post-merger, the market share of the entity will be 10.67%, making it the country’s second-largest bank.
  • Equity Group entered a non-binding agreement with certain shareholders of Banqué Commerciale du Congo (BCDC), for the purchase for cash of a controlling equity stake in BCDC, with a view to eventually amalgamating the business of BCDC with that of EGH’s existing banking subsidiary in DRC, Equity Bank Congo.
  • The CAK approved the proposed acquisition of National Bank of Kenya by KCB Group on condition that 90% of the merged entity’s employees will be retained for a period of eighteen months.
  • Fund manager ICEA Lion Asset Management has signed an agreement to acquire Stanlib Kenya’s business of managing funds, assets and investment in Kenya – including the Fahari I-REIT – in a deal valued at Kshs 1.5 billion. 
  • The business of non-deposit taking micro-finance carried on by Kenya Ecumenical Church Loan Fund has been transferred to ECLOF Kenya. 
  • The CAK has authorized the proposed acquisition of 93.57% of  Transnational Bank Plc by Access Bank Plc.
  • Exim Bank Tanzania acquired UBL Bank, a subsidiary of Pakistan’s UBL Bank, as part of its plan to expand nationwide and become a top- five bank in the country. It now has assets of 1.7 trillion Tanzania shillings. 
  • In 2017 private equity firm Capitalworks acquired AON’s shareholding in several African operations, alongside local shareholders including governments in many markets.
  • I&M Holdings unit, GA insurance has acquired 100% of Nova Insurance Company in Uganda. It is part of GA’s plan to expand across East Africa where insurance penetration remains low. (via Kenyan Wall Street).

Agri-Business, Food & Beverage M&A

  • Coca-Cola Sabco (East Africa), which owned 72% of Nairobi Bottlers, has bought 27.6% of that company from Centum Investments, along with 53.9 % of Almasi Bottlers for a total of Kshs 19.2 billion. Centum states that the stakes had a combined value of Kshs 16.8 billion. CAK approved the deals on condition that it continues to operate current bottling plants in Nyeri, Eldoret, Nairobi, Molo and Kisumu for at least three years and retains 1,749 of the 1,760 permanent employees for the same period. Also that Almasi reserves 20% of the storage space in its coolers to SMEs for products (excluding products of Coca-Cola’s three largest global competitors). Coca Cola shall also allow Coastal Bottlers to distribute other non-alcoholic ready-to-drink brands.
  • The CAK approved Vivo Energy B.V.’s proposed investment in Kuku Foods which operates 24 outlets in Nairobi, Mombasa, Nakuru, Eldoret, Kisumu and Nanyuki under franchise from America’s Kentucky Fried Chicken (KFC).
  • The CAK approved the proposed subscription of 33.9% and joint control of Maziwa by Pledge Holdco, which is wholly-owned by Texas Pacific Group (TPG). Maziwa is owned by Bainne and distributes of milk and milk-related products in Kenya, Uganda and Zambia under the brand name ‘Lola’.  The CA determined that the main players in the processed milk market, were Brookside Dairy (40%), New Kenya Co-operative Creameries, (25%), Sameer Agriculture (14%) and Githunguri Dairy Co-operatives (12%) while the merged entity will have a market share of 3.9%.
  • The CAK approved the acquisition of 100% of Aquamist Ltd by Aquapani Ltd. Aquapani is newly incorporated in Kenya as a wholly-owned subsidiary of the Menengai for the sole purpose of this transaction. The deal is being done alongside Aquaplast which manufactures PET bottles, jars and closures and Polycarbonate plastics for refillable water containers mainly for the bottling business of Aquamist.
  • The CA-K approved an investment by Stitching DOB Equity and Acumen Fund into Coconut Holdings which had a turnover of Kshs 162 million in 2018. More here.
  • The CA-K approved the acquisition of 100% of Gilani Butchery by Upland Meat Products. Gilani had s turnover of Kshs 116.9 million in 2017.

Health and Medical, Pharmaceutical M&A

  • The CAK authorized the proposed acquisition of Honos Parent Ltd By Doctor No Parent Ltd
  • US pharmaceutical firm Johnson & Johnson has teamed up with private equity firms, South Africa’s Inqo Investments and London-based Sumerian Partners, to buy out Naivasha-based South Lake Medical Centre in a deal valued at nearly Kshs 100 million. The hospital was acquired from Flamingo Horticulture which had established the facility to serve its low-income farmworkers.  
  • Interswitch has acquired eClat, expanding its reach into Nigeria’s health-tech sector. The move is the latest in a series of strategic investments into Africa’s growing digital marketplace by the firm. Asoko has tracked 8 other deals in the Nigerian health care industry since 2015, of which the eClat deal is the second involving a health-tech firm. Investors were most active in the pharmaceutical segment, with three deals in that space over the period. (via Asoko
  • The CAK authorized the acquisition of 54.23% of AAR Health Care Holdings by Hospital Holdings Investments.

Logistics, Engineering, & Manufacturing M&A

  • The  CAK authorized the proposed acquisition of all ARM Kenya‘s (Under Administration) businesses, assets and properties by National Cement Company on condition that the merged entity ensures continued operation at ARM’s Kaloleni and Athi River plants and retains 95% of ARMs 1,100 employees.
  • The CAK authorized the proposed acquisition of the plastic manufacturing business of Metro Plastics (Kenya) by Metro Concepts East Africa on condition that the acquirer absorbs at least ninety employees.
  • CAK has authorized the proposed acquisition of control of Chemi & Cotex Kenya by Unilever Overseas Holdings B.V on condition that the acquirer continues providing the products (Whitedent, Bodyline, Baby Soft, Skin Glow, Siri, U & Me, Lovely, Barnister and Tressa) in the market for at least three years.
  • The CAK approved the proposed acquisition of an additional 47.5% shareholding in Speedex Logistics Ltd by Suresh Naran Varsani. The transaction will result in a change of ownership from joint to sole control.
  • The CA-K approved the acquisition of direct control by Tuffsteel in Hwan Sung Industries Kenya which has a turnover of Kshs 5.8 million in 2018.

Real Estate, Tourism, & Supermarkets M&A

  • The CAK approved the proposed acquisition of 100% of Quick Mart by Sokoni Retail Kenya, which is owned by Adenia Partners of Mauritius, a private equity fund manager. Quick Mart, incorporated in 2006, has 10 supermarket outlets located in Kiambu, Nairobi and Nakuru counties. In October 2018, Sokoni had acquired Tumaini Self Service, another retailer in Kenya with 13 outlets located in Nairobi, Kiambu, Kajiado, and Kisumu counties. EDIT Quickmart has recently undergone a merger with Tumaini Self service stores and the merged entity will be the third largest retailer in Kenya, backed by a strong institutional investor, with plans to open 6 stores over the next year.
  • The CAK approved the proposed acquisition, with controlling rights, of 22.32%  of the Riara Group of Schools by Actus Education Holdings AB. Riara operates six learning institutions in Kenya which offer the 8.4.4 and British Curriculum education systems. The CA found that of the schools offering British Curriculum, Braeburn Schools with 10.2% of the students, Aga Khan Academy 7.1%, Srimad Premier Academy 3.8%, and Oshwal Academy 3.4%. The CAK has approved the acquisition of 100% of the shares in Abercrombie & Kent Group of Companies by Heritour Ltd. One of Abercrombie’s Kenya subsidiaries is a tour operator that offers tourist accommodation in the Maasai Mara.

Telecommunications, Media & Publishing M&A

  • The CAK authorized the proposed acquisition of 100% shareholding in Eaton Towers Holdings by ATC Heston B.V 
  • BRCK has acquired the Surf Network. BRCKs Moja Network passed 300,000 unique monthly users in January, with 1,500 mobile nodes in buses and matatus across Nairobi and Kigali. The new acquisition takes them close to 500,000 active monthly unique users,  and they state this is the largest public Wi-Fi network in East Africa, and second-largest on the continent. 
  • Co-creation Hub (CcHUB), the leading technology innovation centre in Nigeria, acquired Kenya’s iHub for an undisclosed fee. The deal will see the iHub become part of the CcHUB’s network, while retaining its name and senior management structure.  The move comes seven months after CcHUB expanded into Rwanda, with the launch of its Design Lab. 
  • The Airtel-Telkom merger is still ongoing. Kenya’s Parliament has raised some queries about the transfer of government assets and shares as has the Ethics and Anti-Corruption Commission. Rival Safaricom also stepped in and pressed for the two companies to settle a combined debt of Kshs 1.3 billion they are owed before the transfer is completed. They also argue that the merged entity will have an outsize frequency allocation (77.5 MHz of spectrum serving 17.3 million customers) compared to Safaricom (who serve 31.8 million customers with 57.5 MHz) and ask that this is rebalanced.
  • The CAK authorized the proposed acquisition of 100% of  De La Rue Kenya by HID Corporation on condition that all existing contracts De La Rue has with the Kenyan Government are honoured.
  • The CAK has authorized the proposed establishment of a joint venture and the acquisition of control of certain assets of Kul Graphics, The Rodwell Press, Printfast Kenya, Digital Hub and Colourprint by The Print Exchange on condition that the parties retain 100 permanent employees of the merger parties for a period of one year after completion of the transaction and the 72 contractual employees serve to the end of their contracts.  In May 2019, the directors of the six companies had announced plans to merge due to the printing industry’s price sensitivity and demands for new technological innovations that had created financial and operational challenges for them.
  • The CAK has approved the acquisition of 80% of iWayAfrica Kenya by Echotel International Proprietary. iWayAfrica Kenya provides a range of ICT services. The CA estimated market shares for the main providers of retail Internet access services to be Telkom Kenya (28%), Liquid Telecom (25%), Safaricom (14%), Internet Solutions (13%) and Simbanet (4%). iWayKenya is at 1.2% and Echotel at 0.6%.
  • It was announced this week that two of Tanzania’s best-known telecommunications companies – Tigo and Zantel – have completed there merger, combining their operations on both mainland Tanzania and Zanzibar. (via Arden Kitomari)
  • The CA-K approved the acquisition of direct control of Digital Packaging Innovation Holdings and A-One Plastics by Rifts Investments.
  • ScanGroup is set to sell two of its subsidiaries for more than Sh2.4 billion in a deal that was triggered by a related transaction involving its London-based parent company WPP Plc with Bain Capital. Read more.

Other M&A

  • The business carried on by Pa’shante Enterprises in Nairobi has been sold and transferred to Pashante Greens Africa.
  • The assets and inventory of Mapflex East Africa at Airport North Road will be transferred to Actiflex Ltd. 
  • The business of a barber and spa carried on Crystal Barber and Spa on Kiambu Road has been sold and transferred to Esther Kinya Guantai. 

Since the last update in January 2019

Equity buys BCDC, its second bank in DRC

Kenya’s Equity Bank Group Holdings has entered an agreement with some shareholders of Banqué Commerciale du Congo (BCDC) to buy a controlling stake in the bank with a view to consolidate it with its DRC subsidiary.

This comes a few years after Equity invested in DRC by purchasing a stake in ProCredit Bank. At the end of 2018, the DRC constitutes 8% of Equity group’s revenue, second behind Kenya’s 75% and ahead of Uganda, Tanzania and Rwanda. The DRC subsidiary had ~$558 million in assets, accounting for about half of its regional subsidies, with ~$13 million pre tax profit.

The deal is yet to be approved by shareholders of the institutions, the central banks of Kenya and the DRC and other regulatory agencies.

The bank has nine branches in Kinshasa, four in the southern part of the country and sixteen others in the interior of the country (including Bukavu, Goma and Kisangani).  The main shareholders of BCDC are George Arthur Forrest  & family with 66.53% and the Government of DRC with 25.53%, as well as other shareholders who own 7.94% of the bank. In 2017, BCDC had deposits of $485 million, loans of $282 million and a pre-tax profit of $12 million, that was achieved despite challenges of currency fluctuations and bad debt provisions.

EDIT- November 19: Equity Group will acquire 66.53% of BCDC by paying George Arthur Forrest $105 million for 625,354 shares, inclusive of dividends.

Equity Group plans to consolidate BCDC with Equity Bank Congo (EBC, formerly Procredit), and will pay KfW, the German development bank, $9 million for its 7.67% stake in EBC, after KfW exercised a put option that the Government of DRC will have to approve.

Transaction advisors for the deal are Stanbic Bank Kenya and legal advisors are Anjarwalla & Khanna.

African Banker Awards 2019 Nominees

The winners of the 2019 African Banker Awards will be announced on June 11 at the Annual Meetings of the African Development Bank (AfDB) in Malabo, Equatorial Guinea. 

Multiple nominees this year include Absa, the Trade & Development Bank, Equity Bank, and Standard Bank while first-time nominees include Family Bank of Kenya who partnered with Simba Pay to enable payments via WeChat to China, Kenya’s largest trading partner. There are also nominees for arranging sovereign Eurobonds and IPO’s, while UbuntuCoin, an asset-backed digital currency that was a finalist at last year’s awards, is nominated again.

The complete list of shortlisted nominees for 2019 are:

African Banker of the Year:  Admassu Tadesse (Trade and Development Bank), Brehima Amadou Haidara (La Banque de Développement du Mali), Brian Kennedy (Nedbank, South Africa), James Mwangi (Equity Bank, Kenya) and Johan Koorts (ABSA, South Africa).

Award for Financial Inclusion: 4G Capital (Kenya), Amhara (Ethiopia), Bank of Industry (Nigeria), Cofina (Senegal), Jumo (South Africa).

Best Retail Bank in Africa: Coris (Burkina Faso), Ecobank (ETI), Guarantee Trust Bank (Nigeria), KCB (Kenya), QNB AlAhli (Egypt).

Deal of the Year – Debt: Absa ($350M Old Mutual Renewable Energy IPP), Afrexim – ($500M ChinaExim Syndicated Loan), CIB ($389M Egyptian Refining Company), Rothschild ($2.2 billion Republic of Senegal Dual-Currency Eurobond), TDB ($1 billion Sovereign Loan to the Government of Kenya).

Deal of the Year – Equity:  Al Ahly (Canal Sugar Equity), EFG Hermes (ASA IPO), RenCap (CiplaQCIL IPO), Standard Bank / RMB (Vivo Energy IPO), Standard Bank IBTC (Flour Mills of Nigeria Rights Issue).

Infrastructure Deal of the Year: Absa (Enel Green Power), Afrexim (Syndicated Loan for EBOMAF/Government of Cote D’Ivoire), National Bank of Egypt (ElSewedy Electric Hydropower Project), RNB (Roggeveld Wind Power Project), TDB (Mozambique FLNG Project).

Innovation in Banking:  ABSA (South Africa), Family Bank (Kenya), KCB (Kenya), MCB Capital Markets (Mauritius), and Ubuntu Coin (Côte d’Ivoire).

Investment Bank of the Year: ABSA (South Africa), Coronation Merchant Capital (Nigeria), NedBank (South Africa), Rothschild, Standard Bank (South Africa).

Socially Responsible Bank of the Year: Access Bank (Nigeria), Bank Misr (Egypt), Equity Bank (Kenya), KCB (Kenya), Qalaa Holdings (Egypt).

Equity – Atlas Mara bank deal

Atlas Mara and Equity Bank Group announced an agreement for the exchange banking assets.

The deal will see Equity acquire Atlas Mara’s 62% shareholding in Banque Populaire du Rwanda  and Atlas Mara’s interests of 100% of BancABC Zambia, 100% of BancABC Tanzania and 100% of BancABC Mozambique in exchange for Atlas Mara receiving 252 million newly-created Equity shares worth $105 million (Kshs 10.7 billion). Through the deal, Equity expands its Africa footprint into two new countries of Mozambique and Zambia

This also came the day that Atlas Mara announced their financial results for December 2018 which ended with $2.8 billion assets and profit after tax of $34 million, which were slight declines partly attributed to reduced interest income, the enactment of IFRS9 and the economic situation in Zimbabwe.

The four banks combined constitute less than 2% of the revenue of Atlas Mara. They would all require capital and liquidity to support and will now be consolidated off the Atlas Mara balance sheet in the deal to be concluded by the end of the year. Atlas Mara will now continue to focus on core investments where they can be market leaders. In 2019, they plan on stabilizing the bank in Zimbabwe and increasing their 49.7% shareholding at Union Bank of Nigeria.

Also In the results announcement, Michael Wilkerson, the Executive Chairman of Atlas Mara wrote about being frustrated, liked other shareholders, that the company’s share prices did not represent its true value and that the new stake in Equity, digital banking leader, would help improve that. They also did a BankABC Bostwana IPO in December 2018 selling 25% of the bank to investors on the Botswana stock exchange.

EDIT: The Business Daily reported on October 9, 2019, that Equity got a $130 million (~Kshs 13 billion) discount on the purchase of the four banks from Atlas Mara whose prices were marked down after a due diligence exercise.

CBK Fines Banks over NYS Transactions 

The Central Bank of Kenya (CBK) has levied bank fines against five institutions over transactions relating to their handling of payments and movement of funds sent from the scandal-plagued National Youth Service (NYS).

The banks are Diamond Trust which handled Kshs 162 million, and was fined Kshs 56 million, Co-operative Bank which handled 263 million (and was fined 20 million), KCB which handled Kshs 639 million (fined 149.5 million), Equity moves Kshs 886 million (89.5 million fine) and Standard Chartered which handled Kshs 1.63 billion from the NYS, and which was fined Kshs 77.5 million.

The CBK statement read that the bank fines followed investigations into failures at the banks including; not reporting large cash transactions, not doing due diligence on customers, lack of support documents for large transactions and lapses in reporting suspicious financial transactions to the Financial Reporting Centre (FRC).

Notably missing was Family Bank that featured heavily in a prominent series of transactions of funds that originated from procurements at the NYS. It has been previously sanctioned and branch and senior staff are being prosecuted.

All the banks which handled NYS funds had been named earlier and the CBK statement added that this was not the end, with an additional group of banks set to be identified and investigated.