Regional lender Kenya Commercial Bank (KCB) has announced its intention to acquire the struggling state-owned National Bank of Kenya (NBK) through a share-swap.
The transaction, which will lead to the delisting of NBK stock, currently trading at below the par value of Ksh5 ($0.05), on the Nairobi Securities Exchange (NSE)
The deal is subject to shareholder and regulatory approvals.
In a statement, KCB said the acquisition would be by share swap of 10 ordinary shares of NBK for every one ordinary share of KCB.
“In all respects, the offer shares will be acquired free from all liens, charges, encumbrances and other interests and together with all rights now and thereafter attaching thereto including the right to receive all dividends and other distributions hereafter declared, made or paid,” said Joseph Kania, KCB Group Company Secretary.
Last year, KCB—the region’s largest lender by assets —posted a 22 per cent growth in net profit to Ksh24 billion ($240 million) from Ksh19.7 billion ($197 million) in 2017.
Its revenue remained flat at Ksh23 billion ($230 million) as a result of declines in foreign exchange income and on fees and commissions charged on banking transactions.
National Bank is among listed firms that the Capital Markets Authority (CMA) had planned to put on the proposed recovery board of the NSE due to its financial woes.
NBK’s woes started in November 2015, barely two months after the bank had announced its most transformative results which saw it post a net profit of $22.5 million for the nine months to September 2015, with the board raising eye brows on the treatment of the loan loss provisions.
The troubles deepened in 2016 after its board sent the Chief executive and five senior managers on compulsory leave for violating the lender’s internal credit rules.
These included understating the loan loss provision, which plunged the institution into a loss of Ksh1.2 billion ($12 million).
Since then the NBK has never recovered from its financial troubles and last year it sunk further into the red reporting a 98 per cent drop in net profit to Ksh7 million ($70,000) from Ksh410.78 million ($4.1 million) in 2017.
The National Treasury and the National Social Security Fund (NSSF) control 22.5 per cent and 48.1 per cent shareholding in National Bank.
The two anchor shareholders also hold a combined 1.13 billion preference shares in the bank.
On Wednesday, before the material announcement of the proposed acquisition, NBK stock on the NSE stood at Ksh4.39 ($0.043) per share having dropped 3.94 per cent from the previous day’s price of Ksh4.57 ($0.045) per share.
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