Category Archives: Helios Partners

Mostly Equity – Suspensions & Housing Evictions

Equity suspended: Equity Bank was briefly suspended as a Central Depository Agent by the Central Depository & Settlement Corporation (CDSC). They have smartly escaped unscathed without answering any charges owing to:
– Playing one regulator against another the. The Capital Markets Authority (CMA) immediately reversed the ban, and reinstated Equity while terming the CDSC action as being against procedure
– By invoking the ‘small investor’ Equity said that they were in trouble because they had reached out to the small investor, lending them funds to buy Safaricom shares without collateral, and some people did not like that

Lost in the story is:
– Equity split shares were supposed to start trading on April 14, but have been trading as split prices and have appreciated about 40% since the announcement
– The spat makes the CMA and CDSC look bad; by having a turf war (PDF) and fighting in public both claiming to fight for the integrity or interest of investors
– Why won’t Equity pay the minuscule amount or respond to the regulator (CDSC)?
– Comments made by the CEO at the bank AGM, bragging having the most investor accounts in the country coming back to haunt at a time when brokers are (i) broke (ii) resentful/envious
– More tales at the stockskenya forum

Equity moves in at Housing Finance: At Housing Finance, Equity is asserting its authority at the bank and Equity directors will now form 1/3 of the Housing Board of Directors, with Peter Munga (Equity chairman) Benson Wairegi (Equity vice chairman) and Babatunde Soyoye (Helios) all appointed in 2008 and who will all be ratified by Housing Finance shareholders this month.

During the 2008 rights issue at Housing Finance, Equity also increased their ownership stake from 20% to 24.9% while sister institution British American Investments (Britak) also increased from 4.9% to 7.5%. The rights issue also saw the National Social Security Fund reduce stake from 7.8% to 6.8% as the Government of Kenya which did not take up any new shares saw its stake reduce from 7.3% to 3.6%

Opportunities

Free Download Githongo Book – The most talked about book in Kenya – It’s Our Turn to Eat – the Story of a Kenyan Whistle-Blower (John Githongo) by Michela Wrong will be available for download from April 10. yes you probably have a bootleg copy, but this is the real one from the publisher

– Invest in a Government of Kenya Bond to raise 10, billion shillings ($125 million), and earn a potential 10% bond return (PDF); minimum application amount is 50,000 ($625), and the offer closes 22 April. (better than Madoff?)

– Maker Faire Africa (MFA), a celebration of African ingenuity, innovation and invention, will take place August 13-15 at the Ghana-India Kofi Annan Centre of Excellence in ICT in Ghana’s capital, Accra there are opportunities to sponsor the summit

– Jitihada is the Kenya National Business Plan Competition – (details) (PDF) that will be launched in mid-April.

Create a Logo for an international mobile banking conference and win $200. Details here, found at @whiteafrican

Jobs
– Old mutual: Broker distribution manager, Mass market manager. Apply to recruitment@oldmutualkenya.com by 17/4
– National social security fund managing trustee. apply through manpower associates by 26/4
– Capital Markets Authority: Assistant Manager (Legal Framework), Accountant, Assistant Manager (Investigations), Manager (ICT). D/L is 15 April

Bank Tales II

Maina T kind of started this thread with a review of the P/E correction of Nairobi Stock Exchange (NSE) shares.

NSE: ½ full or ½ empty? – to take it further, how are NSE shares today compared to last October? If you considered them fairly priced then, you are frowning today, but if you considered them over-valued, are you smiling today?
estimates
– Shares that have appreciated since October 2007: 4% – BAT Scangroup, 3% – Access 3%, 1% – Unga
– Shares that have depreciated since October 2007: (83%) – Mumias (74%) NIC (59%) Nation Media Group, CFC (55%) – Housing Finance, (53%) – Sasini (51%) – Kenya Airways (47%) – Sameer (45%) – Kengen, Centum (44%) – Eveready (43%) – Williamson (42%) – Express, Jubilee (41%) – KPLC, Kenol
– Banking sector: Best (4%) – NBK, worst (-74%) – NIC, sector average is -32%

Interesting that despite the world financial meltdown of late 2008, the Kenyan financial sector is faring no worse than other sectors (agricultural, industrial) which are all down approximately 1/3,and remains the sector most likely to produce super-profits again this year. Best performing sector is commercial services (excluding Safaricom only listed in June 2008) which is down 20% from a year ago

Cheap M&A The depressed NSE prices bring out good and bad banking opportunities.
– Good for anyone speculating on buying into a Kenyan bank. The Helios stake in Equity is priced as almost what it was when the deal was signed, while the CFC/Stanbic merger is worth ½ as much as it was a year ago.
– Bad for the Government who are hoping to raise funds from further sale of NBK and Development Bank of Kenya share. It also raises a question of how Co-op Bank IPO shares will be received i.e. if you enter a train going down hill and you want to go up hill, where will you end up?

Family Bank a recent stockskenya discussion could indicate that a listing of shares could happen soon.

EADB: sad tales on the East African Development Bank.

Equity Bank EGM

Equity Bank held an Extraordinary general meeting on Friday, December 21, 2007 in the KICC Amphitheatre. The meeting started 45 minutes late as shareholders were treated to almost a whole CD of the greatest hits of Boney M. The hall never filled up, and it started at about 10:40 a.m.

The Bank Chairman Mr. Peter Munga invited a Chaplain to say a prayer, after which he introduced members of the board of the Bank and legal and transaction advisors (Kaplan & Stratton, PricewaterhouseCoopers, Ernst & Young) in attendance. The Managing Director, Dr. James Mwangi then introduced several of the top managers of the Bank who were present.

The Company Secretary then confirmed that there was a quorum and proceeded to read the notice for the meeting. However, after completing the first of three resolutions (took about two minutes), the Chairman interrupted her and asked if, in the interest of time, all shareholders had read and were aware of the resolutions. We confirmed – and the meeting proceeded on without a full reading.

The MD then gave a brief talk about the proposal to sell 25% of the Bank to Helios Partners. He said Equity had been growing at about 100% a year and now wished to expand into other countries in Africa. They had sought and now found the right partner to finance that growth and with networks & expertise to manage the new ventures. Helios would get two director seats and may add more funds if the need arose.

The 11 billion capital injection from Helios would also ensure compliance with prudential ratios, increase lending capacity, and allow further necessary investment in IT.

Sweetener for shareholders: the MD told shareholders, that though their individual stakes would be diluted by 25%, the net asset value of their shares would increase from 11.9 shillings per share to 39.4 shillings per share. And though shares were diluted, Helios would not take part in the 2007 dividend.

Shareholders questions
There’s a gentleman called Mr. Alois Chami who owns shares in just about every listed company in the country and is a fixture at all AGM’s – known to all company chairman. Normally he’s a bit of a windbag, but today he acquitted himself with his frank questions.

Chami at a previous AGM
Before answering him, the MD complemented Chami as one of the few shareholders who took up the company invitation to inspect the transaction documents at the headquarters

Chami asked;

  • Who was exempt, all shareholders or Helios? – as the Governor of the Central Bank and the Minister of Finance gave differing interpretations.  MD answered – Only Helios is exempted. Helios is a partnership fund investing in the bank, while Kenyan law only recognizes individuals or companies as investors. Also said that existing directors continued to be bound by their non-sale agreement till July 2008.
  • What does the exemption mean? Kaplan lady lawyer confirmed that applied only to Helios partnership and would not venture further
  • No other bank has that exemption, why? Others may look at the exemption and see a political angle, but it was just a business decision made by the Central Bank
  • Does management have the capacity to utilize capital? Management had the competence, and the bank has been growing at 100%
  • Why invest in housing finance (Equity has bought 25%), a sinking ship? Why not Equity’s own mortgage company? Equity saw housing finance as a turnaround opportunity, bought at 18, now at 40 shillings a share and performance will be better as together they will provide affordable housing finance solutions to Kenyans.

Shareholders vote
Since Mr. Chami was the only shareholder with questions, the resolutions were put to the floor and were passed in quick succession, with the first two being straightforward to:

(1) Increase share capital
(2) Allot new shares to Helios
(3) The third amended articles of association of the bank; in addition to the usual modernization resolutions e.g. allowing teleconferencing, also had some unusual ones like if a shareholder is non-responsive for six years, the company may sell those shares and keep the proceeds, made it more difficult for directors to amend dividend policy, business plan or budget (all but one must approve any change)

Edit – One of the Helios managing directors, Mr Babatunde Soyoye, was invited to the podium and he briefly spoke about the new pan-African partnership that the Bank would venture into next.

The Chairman then invited director Dr. Julius Kipngetich (also head of Kenya Wildlife Services) to give a vote of thanks. He thanked the shareholders and assured them that “stick with Equity, and we will make you rich”, customers (now heading towards 2 million customers by January) suppliers (for world-class service) Board of directors (best in the country) management staff (ordinary people doing extraordinary things) transaction advisers, and media (for good coverage even as Equity remained misunderstood)

Finally, the Chairman thanked shareholders, saying they were now richer than when they came in.

Goodies: tea and snacks outside, while all shareholders got a toe bag with Bank brochures and souvenirs book