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Kenya: Co-Op Attaches Price Tag On Bank Ahead of IPO
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Business Daily (Nairobi)
28 April 2008
Posted to the web 28 April 2008
Steve Mbogo
Co-op Bank has attached a price tag of Sh14.3 billion to the business ahead of an initial public offering of its shares to the public that was approved by shareholders at the annual general meeting last week.
The bank told members that it will offload 35 per cent of its shareholding to the public, leaving the majority stake in the company under the ownership of cooperative movements, the current principal shareholders of the company.
The bank is seeking to raise Sh5 billion from that portion, meaning the directors attach a market value of Sh14.3 billion to the entire business.
With IPOs normally subject to a discounts in the range of 10 per cent to 20 per cent, the bank's book value could be between Sh16 billion and Sh18 billion.
Approval of the Coop Bank IPO means the issue can be in the market from July as six weeks is considered adequate to prepare a stock for listing.
"Co-op Bank's gesture will boost its attractiveness in the market, given that the current shareholders have over the last 10 years yearned for a platform of trading with their shares," said managing director Gideon Muriuki.
The bank is owned by more than 57,000 shareholders who include the cooperative movement as corporate entities and individual Sacco members.
The shareholders currently trade the bank's shares through private over the counter transactions.
The current shareholders bought shares in the bank six years ago at Sh100 each in a private placement. The shares were restricted to the co-operative movement and individual co-operators.
The IPO is expected to raise at least Sh5 billion, making it the third largest three major IPO on the Kenyan stock market after that of the just concluded Safaricom (Sh50 billion and KenGen (Sh7.8 billion in 2006).
Co-op Bank's proposed listing also portends a good year for the capital markets which was showing little promise at the height of post election chaos in January.
KCB is also expected in the market any time now for Sh5 billion in a rights issue. The issue is expected to regulatory approval from next week.
Co-op did not disclose when the IPO will be held although going by the practice; it could happen late July when the final preparations of the IPO will have been completed.
Despite being one of the main casualties of the 1998 US embassy bombing in Nairobi, the bank has recovered to post a pre tax profit of Sh2.32 billion in the financial year ending December 31 2007. In 2006, it returned Sh1.26 billion.
The bank is targeting Sh3.5 billion in profit this year, the highest in its history, that is expected to capture the imagination of prospective investors. Mr Muriuki said the money raised from the IPO will be mainly used for expansion and recapitalising the bank to enable it handle bigger business including entry into mortgage.
The bank however said it will not abandon its business model of targeting the un-banked and offering financial services solutions to the savings and credit societies, Saccos.
The bank said it targets to have additional 20 branches by the end of this year from the current 43 and increase the number of its ATMs from the current 150 to 200 in the same period.
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The expansion drive is aimed at increasing the current customer base of 750,000, a substantial increase from the 486,590 customers the bank had in 2006.
The bank's latest financials show that its loans and advances grew by 35 per cent to Sh38.4 billion compared to Sh28.4 billion in 2006. Customer deposits increased to Sh55 billion from Sh48 billion the previous year, a 15-per cent improvement.
Its fund management services division, Co-optrust Investment Services, has increased its funds to Sh17.6 billion compared to Sh11.05 billion of 2006.
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