CDC is set to become the fourth largest owner of I&M after it agreed to fully buy out German and French development finance institutions, DEG and Proparco, who hold a combined 10.68 per cent stake.
I&M said in a notice that the sale to the UK government-owned agency will be done through a private transfer rather than in the open market at the Nairobi Securities Exchange (NSE). The deal is subject to approval from Kenyan and Tanzanian regulators.
The private transfer would allow the seller to load a premium on the prevailing market price. DEG currently owns 6.25 per cent of I&M through a nominee account while Proparco directly holds a 4.43 per cent stake in the bank.
“Shareholders of I&M Holdings are advised that CDC Group plc. has on April 14, 2016 entered into a conditional agreement with two existing shareholders of the company, DEG and Proparco, for the sale and purchase of shares comprising approximately 10.68 per cent of the company’s issued share capital as a private transfer,” said I&M.
DEG is also a shareholder of Chase Bank, which is under receivership, where it holds a 6.6 per cent stake purchased in 2013. Proparco is listed as a senior debt lender to Chase with a credit line worth $40 million.
I&M Bank is currently trading at Sh107 per share with a market capitalisation of Sh41.98 billion, meaning that on the market the 10.68 per cent stake would be worth Sh4.48 billion.
DEG and Proparco initially invested in 2007 an estimated $4.5 million to acquire a combined 11.96 per cent shareholding in I&M Bank, before growing their combined stake to 19.7 per cent after injecting Sh1.2 billion in the bank.
In January 2013, they sold nearly half of their stake in the bank at an estimated Sh3.6 billion, cutting their combined stake to 10.68 per cent which they have held since.
The 2013 sale brought the two firms a 125 per cent return on their initial investment even as they were left with shares worth Sh4.2 billion based on I&M’s set valuation of Sh40 billion at the time.
The sale also came ahead of the lenders’ listing at the Nairobi bourse in June 2013, which would result in major shareholders being locked in the company for a two-year period that lasted until June last year.
DEG and Proparco’s exit also comes at a time when there is expectation of an increase in equity buys in Kenyan banks due to a freeze on licensing new lenders and expected consolidation in the sector following the collapse of Chase Bank, Imperial Bank and Dubai Bank.