Regional lender Equity Group Holding's purchase of four banks in Rwanda, Zambia, Mozambique and Tanzania from a London-listed investment firm will delay after the bank failed to reach a buyout deal within the set deadline.
The bank issued a notice informing shareholders that the binding agreement for the proposed Ksh10.7 billion ($107 million) share swap deal with Atlas Mara Limited (ATMA) has lapsed, opening the way for one of the parties to walk away from the transaction.
“Equity Group Holdings hereby confirms that, as of the date of this announcement, the parties have yet to sign detailed transaction agreements and the Binding Term Sheet has expired,” Mr James Mwangi, Equity CEO, said in the notice without giving details.
“Equity and ATMA (Atlas Mara) expect to continue further discussions in early 2020 to try reach mutually acceptable commercial terms with respect to the proposed transaction or a variant of its,” said the bank, cautioning shareholders that the deal could fail to materialise.
In the Atlas share swap deal Equity will get 62 percent of the share capital of Rwanda’s Banque Populaire du Rwanda and 100 percent of African Banking Corporation of Zambia, African Banking Corporation Tanzania and African Banking Corporation Mozambique.
In exchange, Atlas Mara was to get shares equivalent to a 6.72 percent stake in Equity Bank valued at Ksh10.9 billion ($109 million) .
Atlas Mara had earlier informed the London Stock Exchange (LSE) through its trading report that it marked down the value of the four banks after the Equity Bank deal prompted a due diligence on their financial health.
The investment group said it had lowered the value of the four banks by Ksh13 billion ($130 million) from the sum it used initially to acquire the lenders.
The London-listed firm sees the transaction as an opportunity to take a stake (6.27 percent) in Equity, which is one of the most profitable banks in the region, and generates steady dividends and capital gains from share appreciation ay the Nairobi Securities Exchange.
The bank shares gained 53 percent this year to close trading at Ksh53.50 9 ($0.53) on Tuesday, making it the best performing banks among the 12 listed lenders at the Nairobi bourse.