Customers are served at a Credit Bank branch in Nairobi. PHOTO | FILE
What you need to know:
Credit Bank has set aside 2.16 million newly created shares valued at Sh390 million in a deal styled as employee stock ownership plan (ESOP).
The share sale is extended to employees of Fountain Enterprises Programme, which plans to take control of lender.
Nyachae family-linked Credit Bank is selling its employees a five per cent stake valued at nearly Sh400 million in an ongoing private placement expected to raise a total of Sh5.4 billion.
The tier III lender, where Moi-era politician Simeon Nyachae’s family has a significant stake, has set aside 2.16 million newly created shares valued at Sh390 million in a deal styled as employee stock ownership plan (ESOP).
Credit Bank has disclosed in its information memorandum that the workers’ share sale will also be extended to employees of investment group Fountain Enterprises Programme (FEP) which is currently seeking to take control of the lender.
“The bank and FEP staff will also invest five per cent through ESOP,” reads the Credit Bank restricted offering prospectus. Credit Bank had 170 employees as at December 2014 who worked across its 14 outlets in Kenya.
This means each staff member is entitled to an average of 12,700 shares priced at Sh180 apiece. The offer document does not reveal if Credit Bank and FEP employees will get a discount as is always the case with ESOP.
Mr Nyachae serves as chairman of Credit Bank while his wife Grace Wamuyu is a director. The Nyachae family, through Sansora Group Ltd, directly owns 21.46 per cent of the small lender.
Eric Maina Nyachae, a son of the former Finance minister, serves as senior chief manager in charge of business development at Credit Bank.
Another top owner of Credit Bank is Sanama Investments Ltd (21.46 per cent), an investment vehicle jointly owned by Narendra Gosar Shah and Sandeep Narendra Shah.
FEP, a local investment club with diaspora members in the UK and US, received shareholder approval on Wednesday to buy an additional 30 million shares in Credit Bank equivalent to 70 per cent of the lender.
The investment group last year acquired a five per cent stake in Credit Bank, meaning conclusion of the ongoing share offer will see it control 75 per cent of the loss-making lender, making it a subsidiary of FEP.
A section of FEP’s diaspora members have opposed the current acquisition of Credit Bank, poking holes in the valuations and the financial health of Kenya’s third smallest lender.
Credit Bank’s employee share scheme is set to join other firms which have issued stock to staff members as a strategy to motivate workers as well as attract and retain highly qualified personnel.
Troubled Chase Bank last year issued additional stock to staff under an employee share option which raised Sh600 million.
Workers currently own 429,621 shares or 4.30 per cent of Chase Bank, but are staring at massive dilution after KCB Bank appeared set to buy a controlling stake in the SME-focused lender.
Assuming full uptake of the ESOP shares, Credit Bank employees will join the league of top owners at Credit Bank.
Credit Bank was in the red for the second consecutive year with a loss of Sh59.7 million in the period to December 2015 compared to a Sh91.7 million net loss a year earlier.
The lender started off in 1986 as Credit Kenya Ltd, a non-bank institution. It became a fully-fledged commercial bank in 1995 and changed its name to Credit Bank.
It is ranked 40th in size with 13,000 deposit and 2,000 loan accounts, giving the lender a cumulative market share of 0.27 per cent, according to data from the Central Bank of Kenya.
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