A Co-op Bank branch in Nairobi. FILE PHOTO | NMG Co-operative Bank of Kenya has offered an initial Sh1 billion for the purchase of a 90 percent stake in Jamii Bora Bank, according to disclosures by the small lender ahead of its July 1 shareholders meeting that will consider the proposed transaction.
Jamii Bora’s current shareholders will all be squeezed into a 10 percent stake, with Co-op Bank’s majority ownership giving it the right to appoint the lender’s board and management.
This is a variation from the earlier discussions when the parties announced in March that Co-op Bank would buy a 100 percent stake in Jamii Bora. The new agreement means that existing shareholders will not take out any cash in the deal with Co-op Bank.
The investors, including former Jamii Bora’s chief executive Sam Kimani and his successor Tim Kabiru and private equity firm Catalyst Principal Partners, had previously eyed a combined Sh1.4 billion payday when they tried to sell the bank to former CBA Group in January 2019.
The proposed deal collapsed and CBA proceeded to merge with the former NIC Group to create NCBA Group .
In the new transaction, Co-op Bank will be issued with 224.1 million new “Class A” shares equivalent to nine times the volume of stock held by the existing shareholders. “Allot … new shares subject to payment by Co-operative Bank of Kenya Limited of the aggregate subscription price of Sh1 billion (being Sh4.46 per new share), on completion of the proposed investment,” reads part of the resolutions to be voted on at the Jamii Bora meeting.
“That in accordance with sections 399 and 400 of the Companies Act, the existing issued 24.9 million ordinary shares of Sh66 each be and are hereby redesignated and reclassified as Class B ordinary shares, such shares retaining their existing rights.”
Jamii Bora shareholders will on July 1 vote on the CoopBank offer of Sh1 billion, paving way for further cash injection by Kenya’s fourth largest bank.
Jamii Bora says all the shareholders will have equal rights despite the different classes of stock. The terms of the deal signal the major loss suffered by the current investors.
Their combined ownership will have a nominal value of Sh111 million after the transaction is completed, representing a drop of about 93 percent from the current Sh1.6 billion.
Failure to sell the bank at a premium is attributed to the lender’s losses and capital erosion, meaning that a transaction […]