Equity Group Given Green Light To Own 66.5% Of BCDC

During the week, Equity group was given the green light by the Committee Responsible for Initial Determination (CID), a Commission mandated to monitor and investigate possible breaches of the COMESA Competition Regulations

With the green light, Equity Group is set to acquire a 66.5% controlling stake worth Kshs 10.9 bn in Banque Commerciale du Congo (BCDC), effectively valuing BCDC at 16.4 billion shillings.

BCDC’s profit after tax stood at 1.2 billion shillings as of 2018 with a shareholders’ equity of 10.0 billion shillings giving Equity Group assurance of a bright future in the lender.

The transaction will see Equity Group pay 17,430 shillings per share to acquire 625,354 shares in BCDC, a deal inclusive of dividends issued as at 1st January 2020, from the George Arthur Forrest family.

The transaction will also see Equity integrate the bank with its subsidiary, Equity Bank Congo, to create the second-largest bank in the Democratic Republic of Congo (DRC).

The Price to book (P/B) for the transaction is 1.6x, due to the transaction value being 10.9 billion shillings and the book value acquired by Equity being 6.7 billion shillings.

COMESA Competition Commission, noting the deal will increase Equity Group’s market share without hurting competition, also endorsed the decision.

The transaction is still subject to regulatory approvals from the Central Bank of Kenya (CBK) and Banque Centrale du Congo.

The Monetary Policy Committee (MPC) lowered the Cash Reserve Ratio (CRR), which is a fraction of total customer deposits that the commercial banks have to hold with the central bank, from 5.25 to 4.25 percent.

This move is expected to release approximately Kshs 35.2 bn in additional liquidity and will see banks get more headroom in terms of deposits they can allocate to loans.

“In our view, these measures by the Kenyan banks, which follow the global trend with the International Monetary Fund (IMF) saying that it is prepared to mobilize USD 1.0 trillion in lending, will cushion SMEs and individuals against the economic impact of the Coronavirus pandemic,” said Cytonn Investments.

“We, however, believe that this will also lead to a rise in non-performing loans, because of the tax measure that has seen the suspension of listing at the Credit Reference Bureau (CRB) for default loans for the next 90-days.”