KCB Group Plc has entered a deal to buy out two banks in Rwanda and Tanzania in what will cement its dominance in the East African region, weeks after its main rival Equity Bank pulled out of a similar deal.
The lender, which is Kenya's largest bank by assets, said on Thursday that it had signed a definitive agreement with Atlas Mara (ATMA) to acquire a 62.06 per cent stake in Banque Populaire du Rwanda Plc (BPR) and a 100 per cent stake in African Banking Corporation Tanzania Limited (BancABC) from ATMA in Rwanda and Tanzania, respectively.
KCB Group boss Joshua Oigara said the transaction is part of the bank's strategy to explore opportunities for new growth while investing in and maximising returns from the Group's existing businesses.
The acquisition, he added, will buttress the lender's leadership position and give it a stronger edge to play a bigger role in driving the financial inclusion agenda in the East African region.
"The transaction fits within the Group's expansion strategy and will see us increase our market share and distribution network across Rwanda and Tanzania and improve our operating leverage by enabling us to deliver our existing product offerings to a wider base of customers while positioning the bank for sustainable growth in the long-term, " said Mr Oigara.
"Once the transaction is completed, the Group's Rwanda and Tanzania businesses are expected to have stronger financial credentials to support business growth in the post Covid-19 macro-economic recovery," he added.
BPR is a public limited company incorporated in Rwanda and is licenced by the National Bank of Rwanda. Atlas Mara Mauritius owns the 62.06 per cent stake in BPR that KCB Bank wants to buy out.
"KCB will pay a cash consideration for the BPR shares determined based on the net asset value of BPR at completion of the transaction and using a price to book multiple of 1.09x," the bank says in the notice.
KCB also intends to make an offer to the remaining shareholders of BPR to acquire additional shares from the remaining shareholders. It said it will offer the same acquisition price applicable to the shares to be acquired from Atlas Mara.
The acquisition is, however, subject to shareholder and regulatory approvals from the Central Bank of Kenya (CBK), the National Bank of Rwanda and Comesa.
KCB also announced that it is now going for the remaining shares in African Banking Corporation Holdings (ABCH), which will make the Tanzanian bank a fully owned subsidiary of KCB.
KCB has entered into a share purchase agreement with Atlas Mara to purchase its 96.6 per cent stake in ABC Tanzania. But it also separately intends to make an offer to Tanzania Development Finance Company Limited for the purchase of the remaining 3.4 per cent in ABC Tanzania.
ABCH is the parent company of several banks operating in sub-Saharan Africa under the BancABC brand that offer a diverse range of financial services, and is a wholly owned subsidiary of Atlas Mara Limited.
"KCB will pay a cash consideration for the Tanzania Transaction based on the net asset value of ABC Tanzania at completion of the transaction and using a price to book multiple of 0.42x," KCB said.
In Rwanda, upon completion of the acquisition, the resultant KCB Group business is expected to see the lender double its market share to become the second largest bank in the country.
The BancABC Acquisition In Tanzania, the subsequent merger of BancABC with KCB Bank Tanzania, a subsidiary of KCB Group, will integrate KCB Tanzania's strong retail and corporate banking franchise with BancABC's retail and commercial banking operations.
The merged entity is expected to rank as a top ten bank in the industry. KCB has a presence in six countries and a representative office in Ethiopia.
This comes weeks after Equity Bank terminated similar acquisition talks on grounds that it was working to refine its strategy following the Covid-19 pandemic, which among other things entails conserving cash and having liquidity.
When it pulled out, Equity said the move will enable it support its clients and businesses weather the pandemic and its effects.
Equity Bank said that binding term sheet that had been signed for the proposed acquisition of Atlas Mara Group's assets in Rwanda, Tanzania, Mozambique and Zambia had expired with the parties not having signed detailed transaction agreements.