Kenya reviews report on Consolidated sale
Wednesday July 25 2018
The Kenyan government intends to surrender its stake in Consolidated Bank to private investors. PHOTO | FILE | AFP
The Board of Kenya’s Privatisation Commission will this week review the initial draft of the due diligence report on the sale of the troubled state-owned Consolidated Bank to strategic investors.
The report assessed the financial position of the bank in relation to, among others, its capital adequacy, profitability, liquidity and other legal issues.
The government agency hired a consortium led by PKF Consulting Ltd to advise on the sale of the bank, which will see the National Treasury relinquish its 78 per cent majority stake.
The Commission had received bids from five firms (PricewaterhouseCoopers, Genghis Capital, Standard Investment Bank, Simba & Simba Advocates and PKF Consulting) to advise it on the sale of the lender.
The transaction will involve a cash call of more than 2.5 billion ($25 million) to be underwritten by a firm or individuals who will eventually take up majority shares in Consolidated Bank.
Under this arrangement the Kenyan government and the other 21 minority shareholders will not take up their rights.
This will allow the underwriter to buy all the unsold shares and eventually become the strategic investor with a controlling stake.
The only five minority shareholders expected to participate in the cash call are the Local Authorities Pension Trust (LapTrust), Local Authorities Provident Fund), (LapFund), NSSF, Kenya Reinsurance Corporation and Co-operative Bank of Kenya.
The strategic investors will be required to improve the performance of the bank and protect depositer interest.
Henry Obwocha, the Commission’s chairman said the rights issue will be executed in line with the National Treasury’s recommendations.
The proceeds of the rights issue will be used to boost the bank’s balance sheet, enhance its presence in the digital space, finance branch network expansion and restructure its workforce.
In 2016, South African consulting firm Genetics Analytics advised against a Cabinet proposal to merge three banks and instead recommended their outright sale.
In that year, Consolidated Bank’s first rights issue estimated at Ksh1.8 billion failed after the government, withdrew its commitment to support the cash call.
An attempt to privatise Consolidated in 2009 failed after Nationwide Finance Company Ltd, one of the financial institutions that the Government pushed into a forced merger to form the bank in the wake of Kenya’s first banking crisis in the mid-1980s, moved to court seeking to stop the sale on grounds that the institution’s ownership was in dispute.
Nationwide Finance owners claimed to have been forced into transferring ownership of their company for Ksh10 million ($100,000) and had been engaging the Government for its share of the cake since 2007.
Consolidated Bank was incorporated in December 1989 in a takeover of weak banks and non-bank financial institutions and build public confidence by taking over nine insolvent institutions.