Two of Europe’s largest development finance institutions have sold nearly half of their stake in I&M Bank, estimated at Sh3.6 billion, ahead of the listing of the lender at the Nairobi bourse.
French firm Proparco has sold 1.3 million I&M Bank shares worth Sh1.8 billion to existing shareholders of the bank while Germany’s DEG has agreed to sell a similar stake to its fellow investors by March 5.
This will see their combined stake drop to 10.68 per cent from 19.77 per cent in December, with the two firms earning a 125 per cent return on their investment since 2007, despite remaining with shares worth Sh4.2 billion. The value is based on the bank’s set valuation of Sh40 billion.
Analysts have linked the share sales to the directive to the bank’s top shareholders not to sell more than half of their shares within two years after listing at the Nairobi Securities Exchange (NSE), which could have limited DEG and Proparco sales.
Proparco could only sell a maximum of 1.28 million shares while DEG could only sell a maximum of 1.5 million shares (a combined 2.78 million shares) had they waited to auction their shares after listing at the NSE.
“The lock-in period is most definitely a factor in the share sale by DEG and Proparco,” said a source who did not want to be named before approval of the bank’s listing by shareholders on February 20.
The Capital Markets Authority usually bars top shareholders from selling part of their stake over a period after listing to offer comfort to the minority investors and those buying the new shares.
The share sale has seen the two finance institutions fall below the threshold of top shareholders based on CMA’s definition, opening way for the two to exit the bank fully without restrictions.
Under the merger, shareholders in the larger I&M Bank will be offered 13.62 shares in the investment firm for every share they hold in the bank with investors granted 363,722,034 new City Trust shares in what has been described as a reverse takeover.
This is where a private company’s shareholders exchange their shares for those of a public company, making the non-listed company in this instance I&M Bank a publicly-traded one.
DEG and Proparco invested €4 million (Sh464 million) in 2007 and Sh1.2 billion in 2010 in I & M Bank to acquire a 21.71 per cent stake in the bank.
This means the partial share sales alone earned the development finance institutions (DFIs) a 125 per cent return on their investment —excluding dividend income and their remaining Sh3.3 billion stake.
More DFIs have been selling their stakes in Kenyan firms with ambitions to list on the NSE.
Norways’ Norfund, Netherland’s FMO and Africinvest recently sold their combined 22.4 per cent stake in Family Bank that plans to go public in the next two years.