The planned share swap deal between regional lender Equity Group Holding and Atlas Mara Limited (ATMA), a pan-African investment firm, has stalled over failure to reach a buyout deal within the set deadline.
In May last year, Ventures Africa reported that Equity had reached a pre-contractual agreement with the London-listed Atlas Mara. The deal was expected to see the regional lender purchase stakes in the ATMA’s banking units across four African countries.
The acquisition, to be done through a share swap deal worth over $105 million, would see Equity expand its banking business in Africa through extended services in Rwanda, Zambia, Mozambique, and Tanzania.
Equity was to fully buy out the operations of African Banking Corporation (ABC) from ATMA in Tanzania, Zambia and Mozambique as well as 62 percent of the share capital of Rwanda’s Banque Populaire du Rwanda (BPR).
Meanwhile, Atlas Mara will be given a 6.27 percent stake (or 252,482,300 shares) in Equity Bank valued at $109 million in the share swap.
But in a notice issued by Equity, the bank informed its shareholders that the binding agreement with Atlas Mara has lapsed. This means one of the parties could walk away from the deal.
“Equity Group Holdings hereby confirms that, as of the date of this announcement, the parties have yet to sign detailed transaction agreements and the Binding Term Sheet has expired,” said Equity CEO James Mwangi in the notice without giving details.
Further discussions between Equity and Atlas Mara are however expected to continue early this year as they would try to reach “mutually acceptable commercial terms with respect to the proposed transaction or a variant of its,” Equity said. But it cautioned shareholders that the deal could fail to materialize.
Atlas Mara reduced the value of the four banks after the Equity Bank deal prompted due diligence on their financial health, it said in its trading report on the London Stock Exchange (LSE). The firm lowered the value of the banks by $130 million from the sum used to acquire the lenders.
While the deal had put Equity’s $2 billion expansion strategy across Africa back on track, for Atlas Mara, it was an opportunity to take up ownership in one of the most profitable banks in the region. Equity reportedly generates steady dividends and capital gains from share appreciation at the Nairobi Securities Exchange (NSE).