Equity Bank’s Chief Executive Officer James Mwangi addresses investors at the Equity Bank headquarters in the Upper Hill district of Nairobi, Kenya November 12, 2019. REUTERS/Njeri Mwangi The Kenyan giant is renouncing the acquisition of African subsidiaries of the British headquartered bank Atlas Mara. A decision linked to Covid-19, but not entirely …
Atlas Mara – listed on the London Stock Exchange and co-founded by former Barclays boss Bob Diamond, its CEO until February 2019 – and Equity Group Holdings (EGH) have ended their negotiations that began in April 2019.
The transaction involved Equity’s acquisition of a 62% stake in Banque Populaire du Rwanda (BPR) and all of Atlas Mara’s subsidiaries in Zambia, Tanzania and Mozambique (BancABC). In exchange, Atlas Mara was to obtain a 6.3% equity stake in Equity Group, representing 252.2m shares with an estimated value of $105.4m at the time.
EGH is the parent company of the Equity Bank banking group ($400m in revenues in 2018), the second largest in Kenya and also present in Rwanda, Uganda, South Sudan, Tanzania and the DRC.
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The halt in negotiations “was largely motivated by a change in EGH’s strategy in view of the effects of the Covid-19 pandemic worldwide and on the economies in which [Equity Group] entities operate,” Atlas Mara explains in its statement. Difference in valuation
The discussions announced in April 2019 had not led to a signature by early January 2020, when the deadline set by the preliminary agreement expired.
A situation that did not surprise analysts at the time: “Equity Group Holdings did not reach an agreement with Atlas Mara in December 2019 because, given the market conditions at that time, Equity had to reconsider the transaction due to the difference in value between Equity and the four banks the group was considering acquiring,” says David N. Gitau, financial analyst at Cytonn Investments Management in Nairobi.
“The deal was announced in April 2019 and since then the outlook for Equity Bank has improved due to the removal of the interest rate cap in Kenya, which has created a rally in the share price of Equity Group Holdings,” the analyst said.
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Between May and December 2019, Equity in Nairobi rose from 40.9 to 53.5 shillings, “As such, Equity Group Holdings should have paid more […]