KCB Group disclosed that it had entered into an agreement with Atlas Mara Limited (ATMA) to acquire a 62.1 percent stake in Banque De Populaire du Rwanda (BPR) in Rwanda and a 100.0% stake in African Banking Corporation Ltd Tanzania (ABC Tanzania).
Equity Group had previously entered into a binding agreement in April 2019 with Atlas Mara on the acquisition of banking assets in four countries (Rwanda, Tanzania, Zambia, and Mozambique).
Equity was also to get 62.0 percent of the share capital of Banque Populaire du Rwanda (BPR); 100.0 percent of the share capital of Africa Banking Corporation Zambia (ABCZam) Ltd; 100.0 percent of the share capital of Africa Banking Corporation Tanzania (ABCTz); and, 100.0% of the share capital of Africa Banking Corporation Mozambique Ltd (ABCMoz).
The transaction was to be funded by a share swap whereby Atlas Mara would be allotted Kshs 252.5 mn shares of Equity Group, equivalent to a 6.7 percent stake valued at about 8.9 billion shillings using the closing price of 35.1 billion shillings on 26th June 2020 and effectively valuing Equity Group at 132.3 billion shillings.
However, as highlighted in our Cytonn Weekly #26/2020, in June 2020, the two parties mutually agreed to call off the acquisition plans as the Group was working to enhance their strategy following the COVID-19 pandemic which involved conserving cash and having liquidity.
In the 62.1% BPR acquisition, KCB will pay a cash consideration based on the net asset value of the BPR at the completion of the transaction using a price to book multiple of 1.1x.
Key to note, according to the latest BPR financials, the bank had a book value of Rwf 46.6 bn (Kshs 5.2 bn), and thus at the trading multiple of 1.1x, we estimate KCB will have to part with 5.7 billion shillings.
The Group also separately intends to make an offer to acquire the remaining shares from the respective shareholders.
The proposed acquisition is subject to approval from the shareholders, the Central Bank of Kenya, the National Bank of Rwanda, the COMESA Competition Commission, and the Capital Markets Authority.
KCB has also agreed to purchase a 96.6 percent stake of ABC Tanzania held by ABC Holdings Limited (ABCH), the wholly-owned subsidiary of Atlas Mara.
Additionally, KCB separately intends to make an offer to acquire the remaining shares of 3.4 percent from the Tanzania Development Finance Company Limited. Subject to the approval of the shareholders and the regulatory authorities in Kenya and Tanzania, the current price to book multiple for the acquisition stands at 0.4x.