Global Credit Ratings in buyout talks with Kenyan firm
Metropol East Africa managing director Sam Omukoko: We are looking at a joint venture. FILE
What you need to know:
GCR is targeting Kenya as an entry into the vast Common Market for East and Southern Africa (Comesa), having signed a marketing partnership agreement with Metropol in 2006.
The credit ratings business is seen as having a major growth potential driven by steady economic growth in Kenya and the region.
Since 2006, GCR in partnership with Metropol has rated 80 Kenyan firms.
South African credit ratings company, Global Credit Ratings (GCR), has entered into talks with its Kenyan affiliate, Metropol Corporation, for a share swap deal that could see it acquire a majority stake in the local firm.
GCR is licensed by the capital markets regulator to assign debt ratings to Kenyan companies.
The South African firm is targeting Kenya as an entry into the vast Common Market for East and Southern Africa (Comesa), having signed a marketing partnership agreement with Metropol in 2006.
“We are looking at a joint venture in a bid to deepen the relationship with GCR and grow the ratings business in the wider Eastern Africa region,” said Sam Omukoko, the managing director for Metropol Corporation.
The transaction, Mr Omukoko said, is likely to be purely a share swap acquisition with no cash changing hands.
He added that the Nairobi office will be re-branded to GCR, an indication that the south African firm will have a controlling stake in the business.
The GCR-Metropol deal comes just five months after the entry into Kenya of Nigerian credit ratings firm, Agusto & Co.
The Lagos-based firm got a Capital Markets Authority (CMA) license to operate in Kenya in February, becoming the second credit ratings agency after GCR.
The credit ratings business is seen as having a major growth potential driven by steady economic growth in Kenya and the region, which is expected to increase the number of firms seeking to raise money from shareholders, local banks or international lenders.
Since 2006, GCR in partnership with Metropol has rated 80 Kenyan firms. They include 35 insurance companies, 25 banks, three micro-finance institutions, one Sacco and 21 corporates.
“Metropol’s plan is to increase coverage to 15 more African countries based on the flow of intercontinental trade and investments. We are looking to cover the whole of Comesa and some Central Africa countries which are beginning to develop capital markets,” said Mr Omukoko.
In an interview following Agusto & Co’s entry into Kenya, senior manager Abisodun Soetan said the Nigerian firm would target banks as a core customer base.
“There are opportunities in the banking sector as Kenyan banks migrate towards full implementation of the Basel II and Basel III capital accords,” said Mr Soetan.
Negotiations between GCR and Metropol started in 2010.
The two firms have settled on a transition plan to culminate into the signing of a joint venture deal after achievement of key targets, among them being the enlisting of at least 100 customers.
Metropol has also embarked on a recruitment of key staff, who are to be trained at GCR’s headquarters in Johannesburg. There are also plans to expand the business focus to include ratings of counties and asset-backed securities.
Already three counties; Bomet, Bungoma and Meru have made enquiries about credit rating with a view to raising extra cash to bridge their huge financing gaps.
Mr Omukoko said talks between the two firms have been slowed mainly by political uncertainties that come with election cycles, especially after the disputed 2008 presidential poll that triggered violence.
In that year, only two companies were rated, and none had a positive outlook.
“This year has been different. Since the elections in March, we have undertaken eight new ratings with five other companies expressing interest in ratings over the next three months. We believe that we could hit the critical mass of 100 ratings before the end of the year.” GCR was established in 1996 as the African arm of the New York Stock Exchange-listed Duff & Phelps.
It has a presence in other emerging markets of Asia, Eastern Europe, South America and the Middle East.
