Britam finalises buying Sh2.7bn Equity shares in HF
What you need to know:
Equity Bank on June 30 last year entered an agreement to sell its 24.7 per cent stake in HF (57.7 million shares) to Britam, which is set to raise its shareholding in the mortgage firm to 46.08 per cent.
Britam has completed the Sh2.78 billion acquisition of Equity Bank’s shares in Housing Finance, the financial services group said yesterday in a statement.
The transaction, according to a notice published by Britam, was completed on December 31, saving Equity Bank from having to pay millions of shillings in capital gains tax which became effective on January 1. Equity Bank however billed Britam Sh48.5 million for not meeting the initial transaction deadline of September 30, 2014.
“The Board of Britam is pleased to announce that all of the conditions under the agreement have been fulfilled or waived (where applicable) and the completion of the proposed acquisition took place on December 31, 2014,” Britam’s company secretary Nancy Kariuki said in the notice.
The transaction would have been subject to a five per cent withholding tax on any gains made by Equity Bank as per the new capital gains tax laws. Equity Bank on June 30 last year entered an agreement to sell its 24.7 per cent stake in HF (57.7 million shares) to Britam, which is set to raise its shareholding in the mortgage firm to 46.08 per cent.
The agreed price was Sh47.70 per ordinary share. The HF share sale was to see Equity comply with Central Bank of Kenya guidelines discouraging banks from having strong control on other financial institutions which are not subsidiaries.
Equity’s disposal of its shareholding in the mortgage firm was also seen as driven by new stringent corporate governance regulations that effectively curtailed its ambitious plans for the mortgage firm. The transacting parties anticipated that the deal would have been completed within three months but delays in receiving all regulatory approvals delayed the date by a further three months.
The matter took on a sense of urgency last month as January 1 — the date the new capital gains tax was to take effect — drew near with the transaction still unfinished.
Capital gains tax on property or share transfers became applicable on January 1, meaning Equity was potentially staring at a huge tax bill given the deal’s absolute valuation.
The tax has been set at five per cent of the difference between the transfer price, less expenses associated with the transaction, and the adjusted cost of acquisition.
“The initially agreed completion date was September 30, 2014 and a further amount of Sh48.54 million (equivalent to Sh0.848 per share) was claimed by the seller (Equity) as a delayed completion payment,” said Ms Kariuki in the statement.
Britam’s 46.08 per cent HF stake sees the firm gain strategic control of the mortgage business at a time when it is undertaking multi-billion shilling real estate projects in the country.
