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Equity bank halts expansion plans
Equity Group Holding the parent company of Equity Bank Uganda had been for 16 months negotiating with Atlas Mara to take over its interests in banking units in Zambia, Mozambique, Tanzania and Rwanda. PHOTO | FILE
What you need to know:
- Shares surrendered. Under the deal, Equity Group Holding would have surrendered about 252.5 million ordinary shares to Atlas Mara Limited, representing 6.27 per cent at a value of $107m.
Equity Group Holdings has discontinued the planned expansion into four countries after 16 months of negotiations.
The Kenyan bank, which also has interest in Uganda, had since April last year been negotiating with Atlas Mara to acquire its banking units in Zambia, Mozambique, Tanzania and Rwanda.
The deal would have seen Equity Group acquire 100 per cent shareholding in BancABC of Zambia, Mozambique and Tanzania and a 62 per cent stake in Banque Populaire du Rwanda.
According to Mr James Mwangi, the Equity Group chief executive, the deal fell through last week and focus will now shift to “vertical” growth with the view of consolidating business operations in the existing markets to turn one of East Africa’s biggest financial institution into a $10b bank.
“Our expansion is in two ways; horizontal and vertical. We have opted for vertical expansion where you deepen and then scale up your market share in the countries you are operating in,” Mr Mwangi told The EastAfrican.
Equity had withheld at least $89.2m (Shs332.8b) in dividend pay-out to facilitate the acquisition.
However, Mr Mwangi said it would be impulsive to tell shareholders that “we are being cautious that is why we are withholding dividends [yet] on the other side, we are demonstrating offensive expansionist psychology of buying banks”.
Equity Group is already present in Kenya, Uganda, Tanzania, South Sudan, Rwanda, and DR Congo. Under the deal Equity Group Holding would have surrendered about 252.5 million ordinary shares to Atlas Mara Limited, representing 6.27 per cent at a value of $107m.
Atlas Mara, which was founded on November 28, 2013 by former Barclays Africa (now Absa) Chief Executive Bob Diamond and entrepreneur Ashish Thakkar, has been aggressively extending its interest in the global financial landscape with investments in Botswana, Germany, Mozambique, Nigeria, Rwanda, South Africa, South Sudan, Tanzania, Zambia and Zimbabwe.
At the height of the Crane Bank crisis before it was taken over by Bank of Uganda, Atlas Mara had been in negotiations to acquire a stake in the now defunct bank but the deal fell through after the two parties failed to agree on a proposed write down of at least Shs60b ($17m) off the bank’s balance sheet.
The write down would have brought down the valuation of the Crane Bank from an estimated $300m down to $250m.
Crane Bank was eventually liquidated with some of the bank’s assets and liabilities transferred to dfcu.
Before then, former Crane Bank chairman Joseph Biribonwa had said the bank was looking for a “strategic equity investor” to recapitalise it after it had been hurt by an increasingly growing pile up of non-performing loans.
Atlas Mara has not spoken about the collapse of the negotiations and email inquiries about the matter had not been responded to by press time.
