Equity Group Holdings’ (EGH) ambitious plans to acquire four banks in Rwanda, Zambia, Tanzania and Mozambique owned by Atlas Mara (ATMA) have flopped over economic uncertainties triggered by the Covid-19 Pandemic.
This has further delayed the lender’s plans of transforming into a Ksh1 trillion ($10 billion) banking giant in the region.
In a statement Tuesday, the lender, which is listed on the Nairobi Securities Exchange (NSE), said it has now mutually agreed with ATMA to discontinue discussions on the proposed transaction indefinitely, owing to the volatile operating environment that has prompted banks to conserve cash to cushion themselves against the adverse effects of Covid-19 pandemic on businesses.
"This decision is consistent with the Board’s view of uncertainty of risk which precipitated the proposed withdrawal of Ksh9.5 billion ($95 million) dividend pay-out to shareholders," said James Mwangi, the Group’s Chief Executive.
"The Board has considered the events that have taken place since January when the two parties agreed to extend transaction discussions, and particularly the impact of the Covid-19 pandemic to the world and the economies in which EGH operates."
Equity’s stock on the NSE declined by 1.82 percent at 11.47 am (Tuesday) to Ksh35 ($0.35) per share from the previous day’s (Monday) Ksh35.65 ($0.356) per share as investors digested news about the collapse of the deal.
In April last year 2019, Equity Bank entered into an agreement with Atlas Mara, which is listed on the London Stock Exchange (LSE), to acquire 100 per cent shareholding in BancABC Zambia, Mozambique and Tanzania, including 62 per cent of the shares of Banque Populaire du Rwanda Ltd.
In exchange, Equity will surrender an estimated 252.5 million new ordinary shares representing 6.27 per cent of the bank to Atlas Mara valued at Ksh10.7 billion ($107 million).
In January this year, Equity and Atlas Mara failed to sign a binding agreement for undisclosed reasons, arguing that the renewed negotiations could change the terms of the transaction.
Equity, which currently has operations in six countries–Kenya, Uganda, Tanzania, Rwanda, South Sudan and the Democratic Republic of Congo(DRC) and a commercial office in Ethiopia–had hoped to establish a presence in 15 to 18 countries by 2024 with a customer base of more than 100 million clients as part of its ambitious Pan-African expansion drive.
The Atlas Mara transaction, which was expected to be completed by December 2019, would have raised Equity’s presence to nine countries, in addition to Kenya, Rwanda, DRC, Uganda, South Sudan and Ethiopia.