Equity Group Holdings #ticker:EQTY has entered into a preliminary agreement to buy out banking units in Zambia, Mozambique, Tanzania and Rwanda that are owned by a London Stock Exchange-listed firm.
The proposed share swap deal with Atlas Mara Limited (ATMA), whose value is estimated at Sh10.7 billion, puts back on track Equity’s ambitious pan-Africa expansion strategy, which it had put on hold in 2016.
Group chief executive James Mwangi said on Tuesday the advanced talks will see Equity buy out ATMA-owned African Banking Corporation’s (ABC) operations in Tanzania, Zambia, Mozambique as well as a majority stake in Banque Populaire du Rwanda (BPR).
The binding deal is subject to ironing out final details with ATMA as well as obtaining various approvals, including those from regulators and shareholders.
Mr Mwangi said ATMA will, on successful completion of the agreement, be allotted a 6.27 percent stake, or 252,482,300 shares in Equity in a share swap whose value has been put at Sh10.7 billion.
The bank’s board, Mr Mwangi said, has cleared has allowed the management to enter into a binding term sheet with ATMA “subject to completion of confirmatory due diligence, the entering of detailed transaction agreements and obtaining regulatory and shareholder approvals agreed through a share swap to exchange certain banking assets of ATMA in four countries for shares in EGH”.
“The actual aggregate consideration ultimately payable will be that set out in the detailed transaction agreements negotiated following completion of the confirmatory due diligence and may be subject to adjustment (both positive and negative),” Equity said in the statement.
This will be “based on the performance of the target companies through consummation of the transactions and the net asset value of the banks at the time of closing relative to the net asset value they reported as at December 31, 2018”.
“Further, actual aggregate consideration could include a conditional deferred amount,” the bank added.
Successful execution of the deal will see Equity enter Zambia and Mozambique by acquiring ATMA’s 100 percent shareholding in ABCZam and ABCMoz, respectively.
Kenya’s largest lender by deposit accounts will also expand its wings in Tanzania by buying out ABCTz, while in Rwanda, it will take over a 62 percent stake in BPR currently controlled by ATMA with plans to buy out the rest of shareholders in future.
Besides Kenya, Equity already operate in five other markets Uganda, Tanzania, Rwanda, South Sudan and Democratic Republic of Congo.
Uganda is the only market where Equity started operations from scratch, having entered the rest of the markets through acquisitions.
The lender, publicly traded on the Nairobi Securities Exchange, #ticker:NSE had in March 2015 outlined an ambitious expansion strategy targeting countries outside six-nation East African Community in a plan whose cost was then estimated at Sh200 billion.
Besides DRC, Zambia and Mozambique, the expansion strategy had also targeted Malawi, Zimbabwe, Nigeria, Ghana and Cameroon.
The lender, however, suspended the planned regional expansion plan a year later in March 2016, choosing to consolidate its operations in existing markets.