Equity takes Rwanda bank for Ksh6.7b

The lender, which leads the Kenyan profitability chart, revealed on Wednesday that it has inked an agreement to buy a 91.9% share in Compagnie Générale De Banque Plc (Cogebanque) in a deal worth Ksh7.26 billion.
Equity will purchase the interest from the Rwandan government, Rwanda Social Security Board, Sanlam Vie Plc, and Ms Judith Mugirasoni, and will eventually make an offer to purchase the remaining shares.
“By acquiring Cogebanque, Equity Group will be able to expand its footprint and consolidate its position in Rwanda,” Equity Group CEO James Mwangi stated in a statement.
This is Equity’s second effort to acquire a bank in Rwanda, following the breakdown of a transaction in which Equity was to acquire 62% of Rwanda’s Banque Populaire du Rwanda from Atlas Mara.
The transaction, together with the acquisition of 100% of African Banking Corporation of Zambia, African Banking Corporation Tanzania, and African Banking Corporation Mozambique, failed in July 2020.
The current proposed merger will intensify Equity’s acquisition push in the region, as has been witnessed with its competitors, who have been reducing their reliance on Kenyan revenues by expanding in the region.
KCB, Co-operative Bank of Kenya, I&M, NCBA, Stanbic, NCBA, DTB, Guaranty Trust Bank, and ABC Bank all have subsidiaries in the region and are still looking for new acquisitions. Others, notably Family Bank, intend to gather funds and expand beyond Kenya.
According to Central Bank of Kenya data, Kenyan banks’ net profit from subsidiaries outside Kenya than doubled to Ksh32.51 billion last year from Ksh17.23 billion the previous year, indicating the impact of expansion, which saw loan books outside Kenya increase to Ksh725.8 billion from Ksh510.3 billion.
The number of branches outside Kenya has increased from 494 in 2021 to 552 last year, with deposits totaling Ksh1.29 trillion. 11,125 workers work in these branches.
If Equity’s transaction is completed, these figures will rise because Cogebanque has 28 branches in Rwanda and concluded last year with RWF9.07 billion (Ksh1.11 billion).
Equity will pay a cash consideration of RWF297,406 (Ksh36,485) per ordinary share for the 183,854 ordinary shares to be purchased, according to the binding term sheet.
The purchase transaction is currently subject to the usual conditions associated with such transactions, such as the completion of confirmatory due diligence and the signing of definitive agreements.
Equity BCDC, the DRC unit, increased its profit after tax by 45% last year to Ksh5.8 billion, extending its lead as the most profitable subsidiary, followed by the Rwandan branch with Ksh2.8 billion.
This means that if the latest agreement is completed, it will close the unit profit gap between the DRC and Rwanda. Equity also has activities in Uganda, Tanzania, and South Sudan.
The transaction also requires permission from regulators such as the Central Bank of Kenya, the Banque Nationale du Rwanda, the Comesa Competition Commission, and the obtaining of all applicable board and shareholder approvals.
The equity transaction will complement that of KCB, which paid Ksh25.1 billion in December to acquire an 85% stake in DRC lender Trust Merchant Bank, giving it a presence in the enormous mineral-rich country.
Equity invested an additional Ksh12.2 billion in its regional subsidiaries last year, including a stake purchase in its DRC company, increasing total spending on subsidiaries to Ksh26.64 billion since 2019.
Family Bank and I&M are competing for new business in the region through acquisitions that might expand Kenyan banks’ operations outside of the country. In May, the I&M Group board received shareholder approval to make future buyouts of up to $75 million (Ksh10.5 billion) without requiring a new vote, indicating the bank’s sustained focus on expansion.
In the drive to tier I status, Family Bank is eyeing a $100 million (Ksh13.97 billion) private placement to support acquisitions in Kenya and Eastern or Central Africa.
The lender, which will be 40 years next year, says Uganda, the Democratic Republic of the Congo, Tanzania, and Ethiopia are top priorities.
Business Daily