A Kenyan Bank Is Giving Up 90% Shares In A High-Profile Buyout Plan

By  |  July 3, 2020

Jamii Bora Bank (JBB) in Kenya is earmarked for a major shift in its operations after selling its KES 224.1 Mn “Class A” shares which is equivalent to 90 percent of its stakes to the Co-operative Bank of Kenya for KES 1 Bn (USD 9.38 Mn). The 10-year-old lender has been struggling financially since 2018.

This is the second time the enterprise is attempting to part with its investments. Commercial Bank of Africa had in January 2019 made a KES 1.4 Bn (USD 14 Mn) offer to buy out the bank. The deal had hit a snag due to legal hurdles.

JBB which existed as a Charitable Trust became a fully-fledged and licensed bank in 2010. This was after merging with City Finance Bank (CFB). It also inked a working partnership with Baraka Africa Fund (BAF) and other individual investors.

Its capital base shored in 2011 when rights issue was concluded and stakeholders raised KES 270 Mn (USD 2.7 Mn). Asterisk Holdings, one of the investors further injected KES 320 Mn (USD 3.2 Mn), setting the stage for smoother operations.

As a measure to position itself for sustained growth, a total of KES 1.3 Bn (USD 13 Mn) was raised. This was aimed at boosting the confidence of the shareholders and investors.

Having a core strategic plan of fund diversity and balance sheet stability, August 2013 was the peak of its business. It issued a corporate bond via a private placement amounting to KES 1 Bn (USD 10 Mn). The was priced at 13.3 percent per annum with a five-year tenure and it was oversubscribed by 2 percent within one month.

As of December 31, 2019, it was ranked 38 out of 39 banks with a market share of 0.12 percent and 17 branches across the country.

This week, an extraordinary meeting was held in Nairobi. The shareholders used the platform to endorse the acquisition. The deal will see JBB’s existing KES 24.9 Mn (USD 249 K) ordinary shares re-designated and re-classified as class B. The KES 66.00 (USD 0.66) share price will give owners profits in subsequent years.

The Central Bank of Kenya (CBK), Competition Authority of Kenya (CAK), and the Capital Markets Authority (CMA) will be required to approve the deal before it is formalized. Mr. Gideon Muriuki, Managing Director of Co-operative Bank said that the lender’s entry as a strategic investor is an inclusive growth model.

“This acquisition will strengthen both institutions in leveraging on the Co-operative Bank’s well-established universal banking model as well as our successful business transformation agenda,” said Muriuki. It is Kenya’s 4th largest bank, predominantly owned by the 15-million-member Kenyan co-operative movement.

In 2008, it was listed on the Nairobi Securities Exchange and has a market share of 9.63 percent with 159 branches in Kenya and South Sudan.

The buyouts in the Kenyan banking sector have been increasing over the years. Some of the retailers that have been acquired include; National Bank of Kenya bought out by Kenya Commercial Bank (KCB), Fidelity Commercial Bank (SBM), Equatorial Commercial Bank (Mwalimu Sacco), and K-Rep bank (Centum).

Habib Bank Kenya by Diamond Trust, Giro Commercial Bank (I&M), and Fina (Guaranty Trust) are also among the entities which have been bought.

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