Kenya Commercial Bank (KCB) is set to spend a staggering Sh. 14.1 billion on the National Bank of Kenya (NBK) in a buyout that is expected to offer a lifeline to NBK.
The first of this amount will be Sh. 6.6 billion which will be used to acquire the bank in a share swap deal estimated to be of this amount. Thereafter, KCB will pump in an additional Sh. 7.5 billion in NBK in order to shore up the bank’s capital and fund its growth.
In the deal, NBK will take a 4.5 per cent in KCB. This deal is expected to be completed by the month of July this year.
Interestingly, KCB chief executive officer Joshua Oigara said that KCB has adequate funds that will enable it to take in NBK without raising additional capital.
“We have surplus capital and we don’t see the need to take new capital for the next few years. We will maintain our dividend payout ratio of 50 percent,” he said.
After the deal, KCB is planning to consolidate the operations of the two lenders. It will also de-list NBK from the Nairobi Securities Exchange (NSE).
“KCB has proposed that NBK’s 1.1 billion preference shares –which have a higher priority claim on the company’s assets and earnings than ordinary shares— be converted into ordinary shares at a ratio of one- to- one. This will raise the volume of issued ordinary shares to 1.4 billion, which will then be divided by ten to arrive at the 147.3 million new shares that will be issued by KCB. The preference shares are held by the government and the National Social Security Fund (NSSF),” says a report in a local daily.
KCB is also set to acquire certain parts of the collapsed Imperial Bank. This means that once the NBK and the Imperial Bank deals sail through, KCB will hold assets of up to Sh. 800 billion. As at December 2018, the bank’s assets stood at Sh. 714.3 billion.