Equatorial Commercial Bank branch in Nairobi. Sacco societies’ regulator seeks to determine the feasibility of Mwalimu Sacco’s bid for the small lender. PHOTO | FILE
What you need to know:
The Sacco Societies Regulatory Authority said Mwalimu had now submitted the due diligence report on ECB owned by billionaire Naushad Merali.
The report will determine the feasibility of the sacco’s Sh2.5 billion offer to acquire a 51 per cent stake in the small lender.
The Sacco Societies Regulatory Authority (Sasra) will next month make a ruling on Mwalimu Sacco’s bid to acquire a majority stake in Equatorial Commercial Bank (ECB).
Kenya’s sacco industry regulator said Mwalimu had now submitted the due diligence report on ECB owned by billionaire Naushad Merali. The report will determine the feasibility of the sacco’s Sh2.5 billion offer to acquire a 51 per cent stake in the small lender.
Sasra said it is currently analysing the in-depth report on ECB’s financial health to decide whether to clear or block the unprecedented takeover of a Kenyan bank by a savings and credit union.
The review of Mwalimu-ECB takeover comes after the government froze the multi-billion shilling deal pending a fresh audit into the viability of the buyout, valuation of the bank, profitability and corporate governance at the tier-three lender.
“Yes, Mwalimu Sacco has submitted the due diligence report and we are looking at them,” said Carilus Ademba, chief executive of Sasra.
“We shall conclude with the matter in a month if all the information is provided to us. We shall deal with it professionally and within the law,” Mr Ademba told Business Daily in an interview.
The 57,521-member sacco has hired its current accountants, Ernst & Young, to offer transaction advisory services on the proposed buyout.
Mwalimu — Kenya’s largest sacco by assets valued at Sh24.5 billion—was set to finalise buying the 51 stake at ECB by the end of October as a strategy to have a slice of the lucrative banking industry.
But the plan has hit turbulence after the government and the industry regulator teamed up to stop the buyout.
The ministry of Industrialisation and Enterprise Development last month wrote a terse letter to Mwalimu demanding ECB’s valuation report, saying the deal does not offer value for money given the bank’s market share, branch network and historical earnings.
“It is imperative for the Sacco to undertake the due diligence and proper feasibility studies on Equatorial Commercial Bank before any commitment is made,” the ministry said in a letter signed by Patrick Musyimi, commissioner for co-operative development.
“This is aimed at establishing its past financial performance and projected financial profitability if any,” said Mr Musyimi in the letter dated September 25, 2014.
There was a new twist last week after the Merali-owned bank transferred its prime office complex to Fidelity Shield Insurance ahead of the buyout.
ECB in a notice said it was offloading Equatorial Fidelity Centre, valued at Sh414.5 million, to Fidelity Shield where it owns a 23.86 per cent stake and the two firms have common directorships. The prime commercial building was a source of rental income for ECB.
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