HF sells Britam stake amid acquisition talks

Housing Finance has sold 10 million shares of insurance group Britam in a transaction that could have earned the mortgage company more than double its initial investment.

Regulatory filings by the company show that Housing Finance (HF) sold the shares about mid this year, a move that helped boost its first half financial performance.

HF bought the Britam shares for Sh90 million during the insurer’s 2011 IPO that was priced at Sh9 per share, and even though it is not clear how much the mortgage firm sold the shares, they are currently worth Sh237.5 million going by the prevailing market price.

HF managing director Frank Ireri declined to comment on the transaction when contacted on Friday.

Britam has announced an intention to acquire a 24.7 per cent stake in HF currently owned by Equity Bank, and it is not clear whether the two transactions are related.

READ: Equity keeps rivals guessing as it exits Housing Finance

The sale of shares saw HF drop from Britam’s list of top local institutional investors where it was previously ranked sixth with a 0.5 per cent stake.

The mortgage firm’s financial statements show that it had classified the shares as “available-for-sale,” which signaled the intention to liquidate them.

It had valued the securities at Sh80 million in June last year, which rose to Sh151.5 million in December, tracking Britam’s share price rally that was sparked by an announcement that the insurance group would acquire a rival firm.

Britam’s share price has nearly tripled in the past 12 months to trade at Sh23.75. Britam itself already holds a 21.46 per cent stake in HF.

The insurance group announced an intention to buy Equity Bank’s 24.76 per cent stake in a transaction valued at an estimated Sh2.2 billion, a move that will raise its interest in the mortgage firm to 46 per cent where it can gain control over HF’s strategic direction.

Housing Finance’s share price has gained 77 per cent in the past one year to trade at Sh44.75, helped partly by the news of Britam’s bid for a larger stake in the housing financier.

The impending deal is the latest that has helped drive Britam’s share price rally in the past one year.

The company recently concluded its 99 per cent acquisition of Real Insurance in a cash-and-stock deal worth Sh1.3 billion.

The Real buyout followed an acquisition of a 25 per cent interest in property development firm Acorn Group for an estimated Sh300 million.
Britam is also eyeing a larger stake in Equity Bank where its ownership currently stands at 10.1 per cent.

Britam, which has previously relied heavily on bonds and quoted equities for investments, is increasing its presence in the booming property market directly and through Acorn and HF.

For HF, the sale of Britam’s shares helped boost its net profit that rose 19.4 per cent to Sh474.4 million in the half year ended June.

This came as other income – including the Britam shares sold – increased six-fold to Sh311.1 million and pushed total non-interest income up 241.1 per cent to Sh506.2 million.

The income made up for a slower growth in interest revenue at 4.7 per cent which stood at Sh2.9 billion, slower than the loan book expansion by a fifth which stood at Sh38.8 billion.