Helios has announced plans to sell half its Equity Group stake in a deal running into billions of shillings to Norwegian investors targeting banking stakes in almost every sub-Saharan African country.
The Equity investment by Norfund and NorFinance comes at a time the country’s investors have targeted stakes in South Africa’s Real People, DFCU of Uganda, Socremo of Mozambique and NMBZ Holdings of Zimbabwe.
Kenya and most eastern and southern African countries are marked as “first wave” countries under the Norfund-led plan.
The Equity Group investment marks the largest exit by a private equity (PE) firm and underscores the lucrativeness of the local banking industry.
Helios was the biggest shareholder in Equity with a 24.99 per cent stake until it announced the agreement to dispose of the 12.223 per cent for an undisclosed amount.
The Helios’ half-stake is valued at about Sh23 billion at the Nairobi Securities Exchange.
The PE first invested in Equity in December 2007 when it bought the full 24.99 per cent stake for $178.7 million or Sh11 billion. Equity Bank, which also kept the value of the deal under wraps, noted it was the largest deal for any African company.
“This transaction which is currently the largest of its kind in Sub-Saharan Africa brings diversification to Equity’s capital base which is important for the Group,” said Equity chief executive James Mwangi in a statement.
PE firms normally invest for a certain period and an official familiar with the deal said the Helios’ deal could herald an exit strategy.
As at January 12, when the deal became effective, Helios’ stake was worth Sh45.34 billion or nearly $500 million. Although Norfund and NorFinance stake at the market would be Sh22.7 billion at current market prices analysts said actual price could be different.
“It is difficult (to tell) unless one of them discloses. I doubt if it will be an open transfer on the Nairobi Securities Exchange (NSE) so again we can’t wait for that,” said Standard Investment Bank head of research Francis Mwangi.
Norfund said its investment is meant to give it access to the fast growing yet underserved low end of the market where Equity has aggressively expanded to, making it the largest bank by customer numbers.
“We look forward to working with all stakeholders to grow the business further in particular as the bank embarks on its new phase of strategic development.
This investment is strongly in line with Norfund’s strategy to support banks targeting entry level and mass-market retail banking, and SMEs, and strengthens our financial institutions investment portfolio in Africa,” said Norfund managing director Kjell Roland.
Equity is the biggest publicly announced exit since the beginning of the year. Earlier in the month NSE-listed Centum and businessman Chris Kirubi sold a combined 13.75 per cent stake in UAP Insurance to Old Mutual for nearly Sh9 billion.
Centum said it would use proceeds from the sale to reinvest in other opportunities. Other major exits reported over the last few months include Leapfrog’s 26.9 per cent stake in Apollo Investments to Swiss Re for an undisclosed amount in October.
Goldman Sachs International, Anjarwalla and Khanna, Norton Rose Fulbright LLP, KPMG and McKinsey & Company were the transaction advisors.