Category Archives: Equity Bank

Equity to absorb Spire Bank

Kenya’s smallest bank will wind up banking operations in a deal that transfers most of its business to Kenya’s second-largest bank, by market share.

A notice by Spire Bank states that all its depositors, except its main shareholder, will become customers of Equity Bank Kenya. Spire had 20,000 depositors, with about 3,700 loan customers and an equivalent of Kshs 1.32 billion of deposits will be transferred to Equity along with loans worth Kshs 945 million.

Equity term the transaction as “immaterial” to their group financial statements as it only adds 0.25% to their deposits now at Kshs 522.7 billion, but which will ensure that Spire customers enjoy uninterrupted banking services. Spire will pay Equity a cash amount, estimated at Kshs 468 million, to bridge the difference in the loans and the deposits transferred.

As per the agreement, Spire will cease offering bank services and deal with its creditors and staff. Spire’s parent, the Mwalimu National Sacco, has over Kshs 60 billion in assets but will walk away from the ill-advised venture into banking – that never made a profit from when it was acquired as Equatorial Commercial Bank – confident that the exit decision is in the best interests of its customers and stakeholders.

Bank of the Year Awards 2021

The Banker magazine is announcing its “Bank of the Year” awards for 2021 today. The awards are grouped by different zones of winners for the Americas, Europe, Middle East & Africa, Asia and overall global.

For Africa, the winners for best bank in different countries were: Algeria (Citi), Angola (Banco BAI), Botswana (FNB), Cabo Verde (Banco Interatlântico), Comoros (Exim Bank), Democratic Republic of Congo (Trust Merchant Bank), Djibouti (CAC International), Egypt (Banque Misr) and Guinea Bissau (Orabank).

Kenya’s bank of the year was KCB, then Mauritius had SBM, Morocco (Bank of Africa), Mozambique (Millennium BIM), Namibia (Windhoek), South Africa (Nedbank), and Sudan (Omdurman National).

Multiple award winners include Ecobank (best in Equatorial Guinea, Gambia, Togo), Equity Bank (for Rwanda, South Sudan, Uganda) and Stanbic (for Ghana, Tanzania, Zimbabwe)

Finally, the United Bank of Africa (UBA) won best bank in thirteen countries across the continent – Benin, Burkina Faso, Cameroon, Chad, Congo, Cote d’Ivoire, Gabon, Guinea, Liberia, Nigeria, Senegal, Sierra Leone and Zambia. The UBA Group also won the overall “bank of the year 2021” for the Africa region.

Equity Bank’s War Chest

Equity Bank has been on a tear, signing deals with other banks for affordable lines of credit for on-lending. The latest ones are with the African Development Bank and FMO.

The recent financing agreements include:

In 2020:

  • September 2020: $50 million (Kshs 5.5 Billion) loan facility with the IFC.
  • October 2020: $100 Million from Proparco (Agence Française de Développement Group) to enable Kenya MSMEs, women entrepreneurs who had been particularly affected by the economic shock of the COVID-19 crisis to create jobs. It is expected to impact 240 MSMEs firms which will create over 5,000 direct and indirect jobs.

In 2021:

  • March 4: EUR 125 million (Kshs 16.5 Billion) loan facility signed with the European Investment Bank. The long-term loan will support Equity customer to sustain and scale their operations, with Kshs 6.5 billion to agriculture and Kshs 10 billion to MSMEs.
  • March 10: $100 Million (Kshs 11 Billion) facility with DEG of Germany, CDC Group of the United Kingdom, and FMO of the Netherlands to support MSMEs cope with COVID-19 over three years.
  • March 15: USD 75 Million (Kshs 8.25 Billion) loan facility with the African Guaranty Fund to lend to women-owned and managed micro, small and medium-sized enterprises in Kenya, Uganda, Rwanda and DRC.
  • March 23: $10 billion (Kshs 11 billion) from the African Development Bank to support its expansion into Central Africa. The  tier-two facility with a 7-year maturity is also to support lending to women and youth entrepreneurs access capital to recover and thrive in a post-COVID environment.
  • March 25: $50 million (KShs 5.5 billion) NASIRA loan portfolio guarantee from Netherlands FMO, covering loans provided to MSMEs affected by the COVID-19 crisis, including women and young entrepreneurs and companies in the agri-value chain.

Which way the bank branch?

This month saw Family Bank open a branch in Eastleigh, its 92nd in the country. Family is one of the pioneers of paperless branches and had opened another branch in December near the large Wangige market to serve traders. Eastleigh is an important cog of Kenyan supply chains and is estimated to have the second-highest density of traders, second only to the Nairobi CBD. Despite advances in mobile transfers, small traders are still heavy users of cash for transactions.

Then today Diamond Trust announced the consolidation of six branches that are adjacent to each other: Oval and 9 West (both to Westgate), Eastleigh to Madina Mall, Garden City to TRM mall, Jamhuri Street (to Malindi) and Kago Street (to Eldoret). The bank asked customers to continue using alternative channels while staff will be redeployed to other branches and business units.

We can probably expect to see more branch consolidations or closures as two groups KCB-NBK and NCBA (CBA & NIC) continue to refine their new operating structures. CBA and NIC did some closures last year.

When KCB announced their third-quarter 2020 results, they shared some interesting details about branches and the march to digital. KCB branches did 2% of transactions in Q3 2020 compared to 5% the previous year. Also, there was a 16% decline in transactions done per day by branch tellers from 60 to 50, while customers did 43% fewer transactions (5.8 million compared to 10.2 million) than in the previous year. KCB customers did 77% of their financial transactions on mobile phones, 17% at agents / internet / point of sale (cards), and 4% at ATM’s. More ATM’s now accept cheque deposits, not just cash, and also act as 24-hour M-Pesa agents.

The Central Bank of Kenya’s Supervision Report for 2019 shows KCB with 203 branches, followed by Equity with 171 (and 12 sub-branches), Co-op Bank 152, Absa 107, Family had 92 in 2019, NBK 78, and Diamond Trust 70. Between 2018 and 2019 there was a drop of 16 branches from 1,505 to 1,490 with 7 of them in Nairobi that ended 2019 with 593.  NCBA has 37 branches but serves the largest number of bank customers in Kenya by far, 31 million thanks to M-Shwari, its partnership with Safaricom.

Outside the country, there is growth as Kenyan banks operate 316 branches in the region, up from 207. They are led by Equity that has 44 in DRC and 39 in Uganda,  Equity has a total of 116, followed by Diamond Trust with 68 (36 in Uganda, 28 in Tanzania, 4 in Burundi)  and KCB with 60.

During Covid-19, foot traffic has reduced at malls, offices shopping centres and bank branches. This has also been due to the growth of online shopping that has taken off exponentially, and many facilities now have dedicated desk and parking spaces for motorcycle delivery riders.

No sign yet of banks moving to share branch spaces with each other but there is less need for banks to be on the ground floor of buildings, which is usually more costly. Also, shopping malls tend to have a banking floor (top of Garden City mall) or ATM corner where several bank services are grouped.

M&A Moment: September 2020

Since the last update of deals in the East Africa region, we are six months into the era of Coronavirus and its effects across the world.

Merger and acquisition (M&A) deal are still happening, with some older ones having been in the pipeline for months before. The impact of the pandemic has also created some new M&A deals and partnerships, while reducing the value of others, and even killing off some earlier-announced merger deals, in scenarios that had all been foreseen by deal-makers.

https://twitter.com/gina_din/status/1227504077203886081

Here are some notable deals (1 US dollar equals 108 Kenya shillings)

Airline/ Oil/Energy/Mining M&A

  • Jubilee Holdings is acquiring an additional 9.4% share in Uganda’s Bujagali Hydropower from SN Power for $40 million to now own 18.2% of the project as part of a diversified portfolio that includes quoted stocks, bonds, real estate and interests in Farmer’s Choice, PDM and Seacom. 
  • The proposal to nationalize Kenya Airways through a National Aviation Management Bill, which grew out of a proposal by the airline to manage Nairobi’s main airport, will be debated in Kenya’s Parliament over the next few months.
  • Shareholders of Tullow Oil approved the sale of its entire interest in Blocks 1, 1A, 2 and 3A in Uganda and the proposed East African crude oil pipeline System to Total. 
  • The proposed Transfer of 85% of Global Petroleum Products Kenya  to E3 Energy DMCC has been approved 
  • Barrick Gold and the Government of Tanzania have signed an agreement to launch a new joint venture to oversee the company’s future gold mining operations in the country. 
  • The Competition Authority approved the proposed acquisition of 100% of Acacia Exploration (Kenya) by Shanta Gold Mauritius.
  • Safaricom bought 18.96% of Circle Gas for Kshs 385 million. The gas company has interests in Tanzania also acquired KopaGas’s technology in a $25 million transaction, one of the largest private equity investment in the clean cooking sector
  • In what will be a controversial deal, Kenya plans to have the Industrial and Commercial Development Corporation become a super agency to oversee a new Kenya Transport and Logistics Network (KTLN) that will coordinate the Kenya Ports Authority, Kenya Railways and Kenya Pipeline Company.
  •  Deal Undone: The Competition Authority has noted that the acquisition of 80% of the Embraer by Boeing has failed to take place following the decision of the parties to withdraw from the transaction. 

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

Kenyan Banks  

  • Kenya’s Central Bank approved the acquisition of 51% of Mayfair Bank by Commercial International Bank, Egypt’s leading private sector bank, and it will be renamed as Mayfair CIB Bank.  
  • The Central Bank of Kenya approved the takeover of 90% of Jamii Bora Bank by the Cooperative Bank of Kenya.
  • Access Bank completed the acquisition of 100% of Transnational Bank. 
  • Centum’s Bakki Holdico has acquired all the shares of the late Ambassador Bethuel Kiplagat in Sidian Bank (via Business Daily) 
  • Equity Bank has completed its buyout of 66.53% BCDC in DRC. Covid saw the final price reduced by $10 million to $95 million.  
  • Deal undone: Atlas Mara and Equity Bank mutually agreed to discontinue transaction discussions given the effects of the COVID-19 pandemic.
  • Deal undone? Businessman Naushad Merali and Mwalimu National Sacco plan to sell their stakes in Spire Bank after it issued a notice to engage potential suitors to buy a 100% of the bank. 

Investment Markets and Deal Makers

  • The Nairobi Securities Exchange acquired 61% of AKS Nominees, which holds an 18% share in the Central Depository and Settlement Corporation (CDSC) for Kshs 77 million.
  • Genghis Capital has partnered with EGM Securities to offer investors a wider range of alternative asset classes including online currencies, commodities, precious metals, oil, and biotech stocks.
  • Helios & Fairfax to partner on Africa investments
  • Fanisi Capital and Ascent Capital are set to merge and raise funds for bigger deals in the region.
  • Two Nairobi stockbrokers AIB Capital and Apex Africa entered a joint venture that will lead to a merger. The entity will be part of Mauritius firm, the AXYS Group which acquired Apex in 2015.
  • African Alliance Kenya investment bank is divesting from stockbroking owing to a structural decline in the agency trading model in both the local and global financial markets (amplified by the Covid-19 pandemic)

Insurance

  • The Competition Authority approved the acquisition of 24.1% of ICEA Lion Insurance Holdings by Eastern Africa Holdings which is being used by private equity firm Leapfrog Investments for the buyout of  ICEA Lion Insurance Holdings for Kshs 10 billion.
  • The sale of Stanlib Kenya to ICEA Lion was approved by the Competition Authority though clients have pulled out Kshs 75 billion following the deal. 
  • Mauritian insurance company MUA completed the acquisition of Saham Assurance Company Kenya. 
  • Octagon Africa, who offer pension, actuarial and insurance services in Kenya, Uganda and Zambia acquired a 49% stake in the Zambia subsidiary of Alexander Forbes who doing a group strategic review. 
  • EDIT: Allianz will acquire controlling stakes in Jubilee Insurance’s general insurance business (property & casualty insurance) in Kenya, Tanzania and Uganda as well as the short-term insurance business in Burundi and  Mauritius for Kshs 10.8 billion ($ 100 million) while Jubilee will also acquire Allianz Insurance Kenya.  

Regional Banks

  • The Tanzania Postal Bank (TPB) has absorbed a third bank, TIB Corporate, in a new merger deal. 
  • The National Bank of Malawi plans to invest in Akiba Commercial Bank in Tanzania in a bid to expand its operations beyond Malawi.
  • The Bank of Tanzania approved the merger of Mwanga Community Bank and Hakika Microfinance Bank to form the Mwanga Hakika Microfinance Bank. 
  • EFG Hermes and the Sovereign Fund of Egypt aim to acquire 76% of the Arab Investment Bank. EFG Hermes will own 51% of the bank and plans to transition from an investment bank to a commercial bank. 
  • I&M Bank is buying Orient Bank in Uganda.  edit The deal in which I&M Holdings acquired 90% of Uganda’s 12th largest bank from 8 miles LLP and Morka Holdings was completed in April 2021. Through the acquisition, I&M Group has acquired additional net loan assets of approximately KES 7.7 Billion, deposits of KES 18.2 Billion, a customer base of close to 70,000, a staff component of 340 employees and a network of 14 branches and 22 ATMs across the country.

Remittances

  • WorldRemit has agreed to acquire Sendwave, an app-based remittance company in a cash and stock transaction. 
  • Beyonic has been acquired by MFS Africa.  

Agri-Business, Food & Beverage M&A

  • Kenya has floated an international expression of interest for the privatization of five sugar firms
  • The Kenya Tea Development Agency Limited (KTDA) and the Japan International Cooperation Agency (JICA) are each investing over Kshs 150 million to set up Africa’s first Japanese speciality green tea production factory at Kangaita Tea Farm in Kirinyaga County. 
  • President Kenyatta has ordered the Kenya Meat Commission to be transferred from the Ministry of Livestock to the Ministry of Defence
  • Dominion Farms on a parcel of land comprising 3,700 hectares at Yala Swamp in Siaya County is being transferred to Lake Agro Ltd.
  • edit Nathan Kalumbu has acquired control of Interstrat Ltd (Big Square Kenya) which has assets worth Ksh 689 million.
  • edit The Competition Authority has approved the acquisition of Dilpack Kenya by Elgon Kenya and the companies will from March 2020 will jointly service the East African market with packaging solutions for the horticultural and floricultural industries.
  • edit The Competition Authority has approved the acquisition of Marsyetu Ltd by Mija Ltd. 

Health and Medical, Pharmaceutical M&A

  • Indo-Oceania Ventures is acquiring Mayfair Healthcare Holdings
  • The CDC Group and Novastar Ventures have invested in mPharma which currently operates in Ghana, Nigeria, Kenya, Zambia and Zimbabwe, and serves approximately one million patients annually, through a network of over 400 pharmacies.
  • edit Goodlife Pharmacy, which had a turnover in 2018 of Kshs 936 million, is acquiring assets of Salama Pharmaceuticals which had a turnover of Kshs 13.3 million and Eurose Enterprises which had a turnover of Kshs 9.8 million in the same years.

Logistics, Engineering, & Manufacturing M&A

  • Mum’s Village Kenya has merged with BabyBliss Nigeria to create the Bliss Group Africa. 
  • Portuguese multinational Salvador Caetano Group has invested Kshs 350 million to launch an automotive hub in Kenya and be the dealer for Renaultand Hyundai cars with plans to venture into the local assembly of the two brands.
  • Bolt, the ride-hailing app, has received a EUR 50 million as venture debt facility from the European Investment Bank to support its research and development strategies.
  • Kenyan e-commerce startup AfricaSokoni has acquired Nigeria company Bolorims to expand into the West African country. The deal, which gives Bolorims a 10% cent stake in AfricaSokoni, creates a new entity in Nigeria, Bolosokoni.com, with AfricaSokoni continue to trade as before in Kenya. 
  • edit Evo Pack Ltd is acquiring Kshs 234 million worth of assets of Digital Packaging Innovation Holdings.
  • edit The Competition Authority has approved the acquisition of certain assets of Bamburi Special Products, a wholly-owned subsidiary of Bamburi Cement, by Yellow House Ltd. .. the deal was terminated by the parties in December 2020
  • edit The Competition Authority has approved the acquisition of 25% of Macquarie Airfinance Limited by Sunsuper Pty.
  • edit The Competition Authority has approved the acquisition of Ignazio Messina and C.S.P.A and Roro Italia S.R.L by Marinvest S.R.L on condition that Ignazio Messina East Africa business continues to operated and managed independently of Marinvest.
  • edit Shareholders of NSE-listed Nairobi Business Ventures approved the sale of 84% of the firm to Delta International FZE of Dubai, for Kshs 83 million, pending regularity approval.

Real Estate, Tourism, & Supermarkets M&A

  • LSE-listed Network International Holdings is to acquire Nairobi-headquartered DPO Group for $288 million worth of shares of Network. The firm whose payment services are used in 19 African countries, was affected by COVID disruptions of travel and the tourism sector. DPO’s founders will get $13m worth of shares and Apis Growth Fund receives $50m of shares in Network. 
  • PrideInn Group has acquired Azure Hotel and re-opened the Kshs 1.2 billion Westlands hotel that suspended operations in March during the pandemic.  
  • Cloud9xp, an online booking service for leisure experiences and an alumnus of Nairobi Garage, has been acquired by Kenyan-based travel-tech outfit HotelOnline in a share swap deal. 
  • Tusker Mattresses announced plans to recapitalize through the sale of a majority stake that is supported by seven shareholders in its Orakam parent company. But it’s not clear if this will be enough to save the struggling retailers that initially tried to secure short-term supplier support through ring-fencing of payments.  
  • Slumberland Kenya is being transferred to Simba Foam.
  • Deal undone: Tiffany & Co. has filed a lawsuit to compel LVMH Moët Hennessy-Louis Vuitton to complete a merger transaction on earlier-agreed terms, noting that COVID-19 has not prevented other parties from concluding similar deals 
  • edit The Competition Authority has approved the acquisition of control Of Kingdom 5-KR- 185 Ltd by Madison Hotels and Resorts. The Business Daily has this story of the sale of hotels between billionaires by Prince Al-Waleed bin Talal to Binod Chaudhary.

Telecommunications, Media & Publishing M&A

  • Edelman, the largest independent global communications firm, has expanded its African footprint with the acquisition of Gina Din Corporate Communications
  • Scangroup completed a long-standing deal after a special EGM in May 2020 saw 88% of its registered shareholders participate and vote 99.98% in its favour.
  • Safaricom and Vodacom have acquired control of M-Pesa in Africa from Vodafone for Kshs 2.15 billion, with each firm paying 50% of the amount (Kshs 1.07.billion) as their share of the joint venture. 
  • Tigo has combined with Zantel. The Tanzanian firms have a combined 12.8 million customers and 7.4 million mobile money users.
  • Mettā and Nairobi Garage are combining their services to create Kenya’s largest innovation community, offering access to all their networks, while members will have access to both organizations’ workspaces throughout Nairobi and the complimentary business support services
  • Nigeria’s CcHub acquired Kenya’s iHub to create a mega Africa incubator.
  • edit French media company Groupe Canal+ SA has acquired a 6.50% stake in Multichoice Africa. This comes after Canal+ acquired African film and television studio ROK in 2019.
  • Deal undone: Telkom Kenya and Airtel have mutually agreed to end their pursuit of a joint venture. This came after conditions were raised that delayed the deal.  
  • edit The Competition Authority has approved the acquisition of 20% of Icolo Limited By Prif Africa Holding.
  • edit Autochek.Africa is buying out Ringier One Africa Media’s Cheki and will operate in Nigeria, Ghana and Kenya where Cheki runs new and second-hand car sales, car importation services, car loans and financing.

Other M&A

  • Sport: The legendary Williams F1 racing was taken over by US investment firm Dorilton Capital. Covid and a sponsor departure were triggers for the deal. 
  • Foreign Aid: The United Kingdom, which is leaving the European Union, plans to merge the Department for International Development and the Foreign and Commonwealth Office – to become the Foreign, Commonwealth and Development Office.
  • Art: The art prize collection of the bankrupt Abraaj Group was acquired by a Saudi art organization Art Jameel and will be hosted at their space in Dubai.