Companies

Tanzanian lender plans majority stake buyout in Kenya’s Oriental Bank

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Bank M Tanzania plc founder and chief executive officer Sanjeev Kumar (left) speaks as Coulson Harney Advocate partner Alex Mathini looks on during the unveiling of the M Oriental Bank limited at the Serena Hotel in Nairobi on June 22, 2016. PHOTO | SALATON NJAU

A Tanzanian lender is gunning to acquire additional shares in Kenya’s Oriental Bank in a deal that will see it take control of the small bank.

The Dar es Salaam-based Bank M is currently wooing shareholders of Oriental Bank to sell to it another 21.25 million shares to raise its stake to 51 per cent.

The offer will be open for six months and has been priced at Sh30 per share, valuing the deal at Sh637.5 million. Bank M says it has hired registry firm C&R to update the lender’s share register.

The bank, through an investment vehicle dubbed M Holdings Ltd, last year pumped Sh1.26 billion into Oriental Bank and was allotted new shares which gave it 33.83 per cent of the Kenyan tier III lender.

“We have engaged C&R Registrar to undertake rebuilding the share register of the bank. The process is currently on. Once completed, the open offer to acquire the remaining 17 per cent from the existing shareholders will be made,” said Sanjeev Kumar, founder and chief executive of Bank M Tanzania plc. “The period of the open offer is six months for completion of the transaction,” Mr Kumar said in an interview.

Upon close of the deal, Bank M will have invested Sh1.9 billion in the lender recently renamed M Oriental Bank Ltd.

Mr Kumar said M Holdings Ltd had signed an agreement with seven top shareholders of Oriental Bank not to dispose of their shares.

This means the offer is aimed at minority shareholders holding less than 3.6 per cent who together control 39.87 per cent of the bank. Bank M is the first Tanzanian lender to enter the Kenyan market.

READ: M Oriental targets family business

The move to acquire majority shareholding in Oriental marks a rare milestone in investment inflows to Nairobi from Dar. Kenyan banks with operations in Tanzania include KCB, DTB, CBA, Bank of Africa, Equity, I&M, and NIC.

Top shareholders

Some of the top shareholders of Oriental Bank, who have locked in their shares for an unspecified period of time, include Pasha Investments Ltd (7.68 per cent stake). This entity is associated with Oriental Bank chairman Shanti Shah, the owner of Valley Bakeries Ltd, makers of Toasti bread.

Nakuru-based businessman Nalinkumar Meghji Shah currently controls 6.51 per cent of Oriental.

Sag Investment Ltd, controlled by Nakuru businessmen Girish Shah and Amu Shah, owns 4.32 per cent of the small bank.

Rupen Mulchand Haria, managing director of Nakuru-based pharmaceutical firm Harleys Ltd, holds 5.1 million shares or 4.11 per cent stake.

Port Louis-based Bank One Ltd, which co-owns a bank in Mauritius with I&M Holdings, has a 3.68 per cent holding equivalent to 4.5 million shares.

Bank M said it plans to shift Oriental’s focus to exclusively serve family-owned businesses, replicating a model it runs in Tanzania which currently has about 305 families as its only clients.

The Tanzanian corporate-focused bank saw half-year net earnings surge by a third to TSh10.6 billion (Sh495.5 million) as at June 2016.
The loan book stood at TSh725.4 billion (Sh33.6 billion) in the period under review.