Monthly Archives: November 2007

Financial Friday

Earlier results showed that tax collection is not profitable, but neither is dealing with the strong shilling.

The Central Bank of Kenya year ended June 2007 shows the bank recorded a 386 million shillings loss down from a 4.5 billion profit in 2006. This was largely due to a forex loss of lost 9.8 billion shillings as the shilling remained strong against the US dollar, Euro and Sterling pound.

How much currency is circulating in Kenya? 90 billion shillings ($1.34 billion), in currency up from 76 billion in June 2006.

Bank in law
You don’t start a marriage by locking out the in-laws, but that’s what’s happening with CFC Stanbic as CFC stockbrokers have suspended trades in Stanbic Uganda shares to clear up a backlog of orders.

Shares vs. Holiday vs. Election expenses
The much anticipated Safaricom IPO edges into danger zone as the IPO could be pushed back to start on December 10th, not the 3rd.

Hedge funds to Africa
There was the Equity – Helios deal announced this week.

Another prime opportunity would be for a hedge fund to invest in Transcentury

PSD blog puts the new investment interest in Africa in a historical perspective with China and other Asian countries recognizing an opportunity to stake out the long term

Hedge Funds a year ago

Equity goes Giga

The story of the day and probably going to be the deal of the year (trumping CFC/Stanbic merger – which while being 6X larger, is not really foreign direct investment – FDI into Kenya) is that Equity Bank is selling a 25% stake to Helios Investors – (official). The deal to sell 90.5m new at shares 122 shares ($1.80) will bring in about 11 billion ($160 million) in new capital to the Bank.

When last months’ post discussed local banks needing
to raise capital a deal of this size was not in the picture. With the new capital Equity will be able to do business up to 150 billion shillings (about
where Barclays is today) – but that growth cannot be organic, so you can look to Equity to buy up a half dozen smaller banks.

Other shareholders must approve the deal in which their stake will be reduced. Fortunately for top managers they will retain their stake while falling under the 5% CBK limit for managers.

Others

– Diamond Trust opens a Branch in Malindi: Way to go after those Italian
accounts
– NIC Bank to buy a stockbrokerage firm.
– Safaricom data costs up: Bamba net a USB modem service was introduced in August 2007 at a cost 6,000 shillings to connect and 2,000 ($28) per month for unlimited net usage up to 700MB then 10 per MB thereafter. Now a new one costs 12,500 and 12.6 per MB after 8,000 shillings worth of free internet.

Opportunities

Joint Voluntary Agency – Financial Comptroller Position: The Joint Voluntary Agency (JVA) operates a US refugee resettlement program in
eastern and southern Africa through a Cooperative Agreement with the Department. It is seeking a Financial Comptroller position (chief accounting officer for JVA Kenya)
Requirements: Professional Certification in Accounting such as CPA, ACCA or equivalent, Bachelor’s degree in commerce or business administration with
specialization in accounting, Four or more years work experience in the NGO sector at management level with supervisory duties, among others. Interested and qualified applicants should submit a cover letter and a résumé by November 20, 2007 to the
Human Resources Manager – hr@jvakenya.org
advertise your job postings here- but preferably only for companies that enable online or e-mail applications

Also
– Capital Markets Authority: Chief executive, Manager legal affairs, National Bank of Kenya – deputy managing director. apply through Hawkins
associates by 27/11
– Nairobi Stock Exchange; head of legal & compliance. apply through Deloitte

CFC-Stanbic Bank EGM: merger approved

An extraordinary general meeting to approve the CFC – Stanbic merger was held on November 12 at the Intercontinental Hotel

Deal: Stanbic is the largest bank in Africa with a presence in 18 Africa countries and 21 others around the world (including Bank of America in Argentina which they just bought). It has assets of $140 billion and 43,000 employees – and by combining their (relatively) small Kenyan operation with CFC, they will become the 4th largest bank in Kenya.

Approval got: CMA, CBK, monopolies commission.
Approval to be got: shareholders, SA reserve bank, NSE.
The Deal should be complete in about a month.

The meeting was led by CFC Chairman Charles Njonjo. Fellow director J. Kierini introduced the board and, other dignitaries present who including D. Ndonye (Deloitte), Jimnah Mbaru, Kaplan & Stratton advisers, and Craig Bond and a team from Stanbic include his son who works at Stanbic Kenya.

CFC MD Soundararajan explained the rationale for the merger – synergies, very similar and complementary customers, regional opportunities, and enhanced capital adequacy. Customers will get a one-stop shop for all their business, staff get to work in a bigger bank with more careers opportunities (and all employees are assured of retaining their jobs).

Shareholder questions

  • Dilution of minority shareholding? : Management said they are getting into a bigger entity
  • Are major shareholders bailing? : Gambit will get paid in new shares but also about 5.8 billion shillings. MD answered that shareholders are staying and the company is not going anywhere
  • Mgmt. afraid to say that CFC being; Management says it’s a merger, and not a sale; the new entity will have 40% – CFC and 60% – Stanbic shareholders.
  • If CFC is growing well, why sell? Need for capital is important. MD said that he needs about $100 million, while the new entity will have around $60 – 70 million. The merger will enhance the company’s growth plans
  • Due diligence on Stanbic? ; Done and they shared strategies which each other to see if they were on the same path. Also, board member (and lawyer) Fred Ojiambo denied that a 25 billion shilling lawsuit had eroded the value of Stanbic (K) saying that claim had no firm base
  • Why no bonus shares instead of selling out?: MD said CFC had in the past given the largest bonus divided in the history of NSE 21 for 1 and the board will consider that at the right time

This is it: The historic moment passed in a flash as the Chairman proposed that all six resolutions be passed in a single vote since they were all interdependent.

The resolutions passed in a single vote:

  • Created 117 million new shares to accommodate Stanbic
  • Empowered the directors to allot shares to Stanbic
  • Changed the name of the company to CFC Stanbic Holdings
  • Transferred the bank business (assets, liabilities, employees, creditors etc.) to Stanbic
  • Amended the new articles of association
  • Changed the business of the company from a bank to a holding company
  • Now CFC Stanbic Holding co to remain listed on the NSE while CFC Stanbic Bank will be a 100% owned subsidiary

Other speakers

Craig Bond: The Head of Stanbic Africa, said they got lucky in Kenya as the first bank they identified turned out to be the right partner offering great synergies; in Nigeria, they have looked at 6 banks which have not panned out. He said that Stanbic which intends to be the ‘best emerging-markets bank’ in the world had identified 3 countries that they intended to dominate in Africa – SA, Nigeria and Kenya where they intend to break into the top 2 (not remain #4), by rapidly expanding branches in 2008.

Commenting on the largest bank in the world ICBC buying 20% of Stanbic (it’s 70% owned by the Government of China) – he said China is coming to Africa in a big way for her resources, and it offered Stanbic cheap money with the promise to match them $ for $ in any investment in Africa

NSE Chairman Jimnah Mbaru said he was proud that the deal happened under his watch and confirmed that he expected NSE to approve the deal by end of the week. He looked forward to having a big institution with the capital to enable the economy to meet growth goals in terms of resources. And finally called out to family-owned companies to see what could happen if they transform themselves into institutions as the late Mr. Jani had done with his firm which was now merging with Stanbic.

There were further tributes to the late Mr. Jani who created the company in 1951 with a vision for into to partner with an international powerhouse, MD Soundararajan and directors Njonjo and Kiereini for making the deal happen

Humorous moment: Chairman Charles Njonjo was sad that there were only ‘5’ shareholders present when the meeting started but got happy as the numbers had reached about 100 by the time it ended. However, it didn’t really matter as he had 45% proxies from Africa Liaison and Gambit while fellow director Kiereini had 30%.

Goodies: souvenir pen, umbrella, big lunch box with little food from intercontinental – (Fanta, cake, apple, and a bit of goat, chicken, and sausage)

other news

Barclays launched tranche one of its bond – 1 billion shillings, maturing in November 2014.

Rwanda and Burundi to join the East Africa Development Bank once they subscribed via share capital

Equity Bank extends banking hours to almost match office hours; 8 a.m. – 4:30 p.m. on weekdays and 8 a.m. – Noon on Saturday

The National Housing Corporation is offering investors loans to build rural and peri-urban homes. The maximum loan amount is only 1.5 million shillings – and it’s advanced at 13% over up to 10 years

Sasanet investors want to notify partners, bankers, and other companies (including Safaricom) that the company had not refunded investors their funds.

Urban transport gets more expensive as all the major transporters Citi Hoppa, KBS and matatu owners start a blanket 10 shilling per ride fare hike to counter rising fuel prices

Opportunities

  • Celtel territory sales executives (17). D/l is 16/11
  • IT manager at EA Cables. apply thru deloitte esd@deloitte.co.ke
  • Jamii Telecommunications: account managers (3). d/l is 16/11
  • KBR various jobs in Iraq, Afghanistan, Kuwait. But …
  • Madison: finance manager, senior investments manager
  • Microsoft: public sector lead account manager – public sector & education solution sales professional (business productivity), infrastructure consultant, MBA graduate
  • Head of ICT services – Standard Group. d/l is 13/11
  • Chief Operating Officer at Renaissance capital. apply to coo@rencap.com by 19/11

What about Shariah depositors?

A glance at the latest report from the deposit protection fund, omits two Shariah banks licensed this year – (Gulf African and Family Community) from the list of institutions whose deposits are protected by the deposit protection fund (DPF)

A further reading of Islamic banking indicates that such banks guarantee depositors funds – but then don’t all banks do that?

LAG


Interpreting a local American Gangster

Having watched ‘American Gangster’ over the weekend then spent a couple of trips around town with a major business player, you get to understand why a certain group of people with mundane jobs can get so wealthy.

It’s understandable how the police do it (roadside bribes), but you can also bodyguards, drivers, personal assistants (PA’s) and even secretaries to that list

They are not necessarily corrupt but they are around centre of power and power players and have a chance to observe. By working closely supporting business and political leaders, they are unique situated to be around when the big deals happen, know what major developments are taking place and are able to spot arbitrage opportunities before anyone else.

Focus on drivers: They are in the company of ministers and other business leaders who talk deals in the cars and over their phones. Like the Frank Lucas character (played by Denzel Washington) in the movie American Gangster, drivers/bodyguards their bosses to meetings and get to see secret deals/big investments develop made by their boss whether it’s a new block of apartments, factory or even a new mistress. They also overhear conversations between the boss and engineer/architect/banker who’s sometimes in the car or over the phone as the boss dashes to/from meeting these same people.

The boss may be buying a building, but his driver may buy a small piece of land in the area or drop a line to a distant buddy to make another small deal. They observe secrets and learn skills at the same time.

Also bosses are human and have a compulsion to brag and backbite like all the rest of us – discussing with their driver the merits or demerits of an ongoing investment, or whether the person who has just hung up is a genius or an imbecile.

So it’s no surprise when a driver retires, he often has a sawmill, matatu or two, and three pieces of land or buildings, with wives scattered all over the country to manage them

His boss never groomed him and he never waited for Christmas or when the bosses’ good fortune sparked a feeling of goodwill and generosity that made him throw some crumbs at his henchmen.

So the driver creates a mini-empire silently over time to cater for his/her retirement, completely legitimate and by one who uses an opportunity to the maximum.