Talks on City Trust buyout of regional bank set to drag on

Listed investment firm City Trust has told shareholders that negotiations for the acquisition of a regional bank look set to drag on for several months.

In October last year, the firm warned investors that it was about to close a deal that would have significant impact on its share price, which has risen 60.9 per cent to the current Sh355.

Though a cautionary announcement has no deadline, lack of update on the talks had raised concerns among investors and analysts with talk that the deal had been put off.

On Tuesday, the investment firm issued an update on the planned acquisition in its report ahead of the company’s annual genera meeting on November 20.

“The proposed acquisition of the bank’s shares has taken much longer time than we had envisioned, rest assured that shareholders’ interests are well looked after in this matter,” said City Trust without giving details. A person with knowledge of the deal said it might take months to close the buyout.

Acquisitions in the banking sector across the East Africa region have been scuttled because the acquirers and targets could not settle on the price.

This has been prompted by giant south and west Africa banks’ increased interest in buying East Africa banks as they look for growth beyond their markets.

KCB, for instance, was forced to set up branches in Rwanda and Uganda from scratch because its targeted acquisitions were pricing themselves out of the market. City Trust could be going through a similar dilemma.

City Trust’s primary source of income is from its eight per cent stake in I&M Bank and it is not yet clear whether the investment firm is seeking to boost its stake in the bank.

Analysts believe that City Trust is targeting a bank outside Kenya, especially in Rwanda.

The investment firm is listed on the Alternative Investment Market Segment (AIMS) at the Nairobi Securities Exchange.

It is a section of the NSE where smaller companies can get listed more easily, with fewer requirements compared with listing on the main market segment.

Its net profit increased to Sh48.4 million in the year to July, compared to Sh35.6 million in a similar period last year. The firm declared an interim dividend of Sh6 per share.