Kenya’s KCB Group offers to purchase National Bank through share swap

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KCB Group, Kenya’s biggest lender by assets has offered to buy National Bank of Kenya (NBK) through a share swap consisting of one KCB share for every 10 of NBK.

The development marks the second major deal among lenders in Kenya since the government capped commercial lending rates in 2016. The decision dwindled lenders’ profit margins and forced them to look to survival strategies like consolidation.

To form the third biggest bank, the third biggest bank by assets in East Africa, CBA Group, a privately held bank, is in the process of merging with NIC Bank. There have also been other smaller transactions including Diamond Trust Bank’s acquisition of Habib Bank Kenya in 2017.

A statement released by KCB said its board would “consider the offer in detail and make consultations and then seek the necessary approvals from the shareholders and the regulators”. Sources familiar with the negotiations cast the offer as a rescue deal aimed at pulling NBK out of its perennial low liquidity troubles.

NBK enjoys a prime position in securing deposits from the government and its agencies, so the acquisition will help KCB increase its share of government banking business.

NBK said the offer was conditional on it delisting its shares from the Nairobi Securities Exchange and converting its preference shares into ordinary shares.

KCB, which operates in Uganda, Tanzania, Rwanda, Burundi and South Sudan, is also finalising the acquisition of 25 billion shillings ($247.16 million) worth of assets from Imperial Bank, which collapsed in 2015.

According to Joshua Oigara, the Chief Executive Officer of KCB, the company has been looking to bolster growth by joining the industry move to consolidate.

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