Capital Markets

Equity sale of HF stake to Britam lifts firms’ share prices

A worker at the NSE. Equity Bank, HF and Britam shares rose on sale deal. Photo/FILE
A worker at the NSE. Equity Bank, HF and Britam shares rose on sale deal. Photo/FILE 

Shares in three listed financial services firms rose to new highs Tuesday, following the announcement of a deal that will change their structures.

The market reacted positively to Equity Bank’s sale of Housing Finance stock to Britam, with all chalking up price gains.

Equity Bank share touched Sh48, HF Sh48 and Britam Sh24 in Tuesday’s trading translating to 52-week highs.

Demand for the three firms rose after Britam announced that it would buy a 24.76 per cent stake in Housing Finance that was previously owned by Equity Bank.

The buyout of Equity’s stake will result in Britam increasing its shareholding in the mortgage lender to 46.08 per cent from 21.32 per cent. The proposed acquisition is expected to give Britam a firm grip on the mortgage industry.

Analysts said that the market’s reaction to HF stock could be a vote of confidence in the mortgage lender.

“The fact that Britam is interested in acquiring more of HF shares implies that there is unrealised value in the stock and in the company,” said Agnes Achieng’, a research analyst at Sterling Capital.

For Equity Bank, the sale will make it comply with Central Bank regulations that discourage banks from having strong control on other financial institutions that are not subsidiaries.

The parties have put in place caps that restrict the price from rising beyond a certain threshold.

“To accommodate for any price adjustments between the announcement date and the completion date, both the vendor and offeror have agreed to set a ceiling and floor to guide the final settlement price,” said a market report by Standard Investment Bank.

The trio’s share prices have all risen since the beginning of the year.

Equity Bank’s share has risen by 52 per cent to Sh47 from Sh34 while HF’s has seen its share soar by 47 per cent to Sh46.25 from Sh31.50.

Britam’s share price has gained 42 per cent to Sh21.75 from Sh15.35. The once conservative underwriting firm has been on an expansion binge, snapping up rival Real Insurance and announcing a major venture into real estate.

Housing Finance is the oldest mortgage firm while Equity is the second largest bank in Kenya.