Kenya's Equity Bank Acquires Uganda Microfinanace Limited

Equity Bank, the fastest growing bank in Kenya has made a grand acquisition - this time a 100% takeover of Uganda's biggest microfinance bank.

The Ksh1.7 billion (US$26.7 million) takeover of Uganda Microfinance Limited (UML) will be paid for through the allotment to the current owners of 11,333,333 new ordinary shares of Equity bank currently going at Ksh147 per new ordinary share.

This allotment will amount to 3% of the expanded share capital.

The deal is pending the requisite regulatory approvals from the capital markets of both countries.

In this case, Equity Bank will present the applications to the Capital Markets Authority (CMA), the Central Bank of Kenya (CBK) who will scrutinize the deal before giving it clearance.

According to the Equity chief executive officer Mr. James Mwangi, the takeover will be completed by June 30 in readiness for the rollout expected by July fast. The preparation will involve the re-branding of the 28 branches currently owned by UML complete with the change of name to reflect 'Equity Bank'.

The Bank of Uganda (BoU) is also expected to clear the deal.

Consequently, the bank will organize an urgent extra ordinary general meeting to get approval from the over 7,000 shareholders. The meeting will be necessitated more by the creation of the new ordinary shares for the deal.

This is the first time a purely Kenyan indigenous bank is making an acquisition 100% in the region.

The acquisition provides Equity Bank with an avenue of disposing the excess liquidity that stood at 77% by the close of last year which was increased by the 25% buy in by Helios EB.

Mwangi said the takeover was in line with the bank's strategic plan of expansion into the regional economy after a successful presence in the Kenyan market.

"Since the investment by Helios EB, we have been actively engaged in strategically consolidating our dominant position in the region and seeking prudent regional entry points. The massive capital injection and the requisite resources of advisors on our board are aligned to deliver on this strategy," said Mwangi.

According to Mwangi, the Ugandan microfinance sector is poised to experience exponential growth with the acquired institution set to grow to a full-blown commercial bank in the long term.

Equity Bank is considered one of the biggest banks on the continent with a financial war chest especially after the Ksh11 billion invested in the bank by Helios EB last year.

The bank currently has its eyes set on the Pan-African market after posting an impressive Ksh2.4 billion in pretax profit last year, which was a 116% increase as compared to the previous year. Equity Bank is currently valued at Ksh68.8 billion ($1billion) according to share performance at the Nairobi Stock Exchange (NSE) making it the largest listed company in the country.

Mwangi said the takeover will facilitate easy transfer of funds in the region and complement the increasing trade relations within the region. Approximately 56% of Ugandan exports pass through Kenya in what promises to be an increased trade environment.

The negotiations between the two sides on the takeover started some three weeks ago and the pricing structure of the shares will be based on their performance on the NSE for the last 90 days.

Last year, UML made a pretax profit of Ush150 million ($89.020), a figure Mwangi is optimistic of doubling in the first one year through a marketing strategy which will target the small savers and the unbanked, which Equity successfully used in Kenya.