Equity Bank of Kenya to acquire Uganda Microfinance Limited
Apr 20, 2008
EQUITY Bank of Kenya has intends to acquire a 100% stake in Uganda Microfinance, top officials announced over the weekend. The proposed acquisition is estimated at Ksh1.7b but would be subject to regulatory approval by the Capital Markets Authority of Kenya, the central bank of Kenya and Bank of Uga
By Emmy Olaki in Kampala
and Reuben Olita in Nairobi
EQUITY Bank of Kenya has intends to acquire a 100% stake in Uganda Microfinance, top officials announced over the weekend.
In a statement to the Nairobi Stock Exchange on Friday, Equity Bank said the acquisition price would be financed through an allotment to the Uganda Microfinance owners of 11,333,333 new ordinary shares at Ksh147 each.
The proposed acquisition is estimated at Ksh1.7b but would be subject to regulatory approval by the Capital Markets Authority of Kenya, the central bank of Kenya and Bank of Uganda.
The deal marks the first time that an indigenous Kenyan financial institution has made a 100% acquisition of such magnitude in the region.
Dr. James Mwangi, the Equity Bank chief executive officer, told reporters in Nairobi on Friday that the deal was awaiting consent from the bank’s 7,000 shareholders who he said would sanction the creation of new ordinary shares.
The buyout that would be financed through a share swap would see shareholders of the Ugandan bank acquire a 3% stake in Equity Bank.
Mwangi said the transaction, scheduled for completion on June 30, was part of the bank’s long-term strategy.
“The choice of the acquisition and market was critical in the long-term strategy,†he said, adding that the microfinance business in Uganda was poised for exponential growth.
He said the plan was to convert Uganda Microfinance’s offering into a fully-fledged commercial bank. Mwangi said the acquisition would attract significant returns to shareholders, facilitate cross-border fund transfers and boost trade relations between Kenya and Uganda. Statistics indicate that 56% of Uganda’s imports come from Kenya.
He said the bank hoped to replicate the success of its microfinance model, which has won global accolades, translating into triple digit growth in earnings for the bank in the last five years.
Last year, Equity Bank’s pre-tax profits jumped 116% to sh2.4b from sh1.1b in 2006. The bank’s market capitalisation stands at Ksh68.8b (over $1b), ranking it the third largest listed company after Safaricom and East African Breweries.
Equity Bank boasts of 41% of all the bank accounts in the Kenyan banking system. The bank opened its two millionth account in March.
Charles Nalyaali, the chief executive of the Uganda Microfinance, explained that the decision to enter the merger was driven by the desire to get into mainstream banking, with the help of a bigger institution.
“Partnering with them will give us the potential to get a banking license, which will enable us mobilise more capital and deposits and help us bring down interest rates,†he said.
“The merger will strengthen us, give us more leverage, confidence in the market, more capital and better computer systems to enable us do ATMs, Internet banking, cash-backs and many other services.â€
The Uganda Microfinance is a dominant microfinance institution operating profitably with 28 branches. It was founded in August 2005. It offers savings and loans to low-income clients with informal collateral.
and Reuben Olita in Nairobi
EQUITY Bank of Kenya has intends to acquire a 100% stake in Uganda Microfinance, top officials announced over the weekend.
In a statement to the Nairobi Stock Exchange on Friday, Equity Bank said the acquisition price would be financed through an allotment to the Uganda Microfinance owners of 11,333,333 new ordinary shares at Ksh147 each.
The proposed acquisition is estimated at Ksh1.7b but would be subject to regulatory approval by the Capital Markets Authority of Kenya, the central bank of Kenya and Bank of Uganda.
The deal marks the first time that an indigenous Kenyan financial institution has made a 100% acquisition of such magnitude in the region.
Dr. James Mwangi, the Equity Bank chief executive officer, told reporters in Nairobi on Friday that the deal was awaiting consent from the bank’s 7,000 shareholders who he said would sanction the creation of new ordinary shares.
The buyout that would be financed through a share swap would see shareholders of the Ugandan bank acquire a 3% stake in Equity Bank.
Mwangi said the transaction, scheduled for completion on June 30, was part of the bank’s long-term strategy.
“The choice of the acquisition and market was critical in the long-term strategy,†he said, adding that the microfinance business in Uganda was poised for exponential growth.
He said the plan was to convert Uganda Microfinance’s offering into a fully-fledged commercial bank. Mwangi said the acquisition would attract significant returns to shareholders, facilitate cross-border fund transfers and boost trade relations between Kenya and Uganda. Statistics indicate that 56% of Uganda’s imports come from Kenya.
He said the bank hoped to replicate the success of its microfinance model, which has won global accolades, translating into triple digit growth in earnings for the bank in the last five years.
Last year, Equity Bank’s pre-tax profits jumped 116% to sh2.4b from sh1.1b in 2006. The bank’s market capitalisation stands at Ksh68.8b (over $1b), ranking it the third largest listed company after Safaricom and East African Breweries.
Equity Bank boasts of 41% of all the bank accounts in the Kenyan banking system. The bank opened its two millionth account in March.
Charles Nalyaali, the chief executive of the Uganda Microfinance, explained that the decision to enter the merger was driven by the desire to get into mainstream banking, with the help of a bigger institution.
“Partnering with them will give us the potential to get a banking license, which will enable us mobilise more capital and deposits and help us bring down interest rates,†he said.
“The merger will strengthen us, give us more leverage, confidence in the market, more capital and better computer systems to enable us do ATMs, Internet banking, cash-backs and many other services.â€
The Uganda Microfinance is a dominant microfinance institution operating profitably with 28 branches. It was founded in August 2005. It offers savings and loans to low-income clients with informal collateral.