The Development Bank of Kenya Limited (DBK) plans to raise new capital from existing shareholders, including Kenya Development Corporation (KDC), coming months after the government announced it was considering selling the lender.
The bank, which is 89.3 percent owned by KDC, a State investment firm, is seeking a consultant to value the bank and then float a rights issue. The other shareholder is TransCentury Limited with a 10.7 percent stake.
A rights issue would mean the government injecting additional money for the transaction to be successful. This will mark a departure from the earlier plan to undertake an outright sale of the bank.
“DBK, a commercial bank regulated by the Central Bank of Kenya and a State corporation, is undertaking an internal rights issue exercise. To facilitate this, DBK requires a comprehensive valuation of the bank,” says the lender in a tender document.
“The primary objective of this assignment is to determine the fair market value of DBK for the purpose of the internal rights issue. This valuation will provide a basis for setting the offer price for the new shares.”
The bank has generally been profitable in the past five years and complying with capital and liquidity ratios. The lender posted a net profit of Sh47.92 million in the year ended December 2023, a drop from Sh65.99 million in the previous year.
DBK’s core capital has averaged double the required minimum of Sh1 billion, closing last year at Sh2.27 billion. The development comes months after the Cabinet approved the sale of the bank in February, followed by the Privatisation Commission inviting consultants to guide the sale of the bank.
The Commission in March this year opened the search for consultants to undertake due diligence work and privatisation strategy analysis for the bank.
DBK started as a non-banking financial institution, then called Development Finance Company Limited, before converting into a commercial bank in September 1996.
Besides DBK, another State-owned lender is Consolidated Bank of Kenya where the government has a 93.4 percent stake. A Treasury official said recently there is no allocation towards funding Consolidated Bank ahead of the institution's planned sale.
Besides the planned sale of the two lenders, the government is also keen to privatise several other entities it owns.
The privatisation programme has 11 State-owned entities including National Oil Corporation of Kenya, Kenya Seed Company, Kenya International Convention Centre, Kenya Pipeline Company, New Kenya Cooperative Creameries and Rivatex East Africa.
The recently released Deloitte Africa Private Equity Confidence Survey showed Kenya is poised to be East Africa’s top investment hotspot for private equity (PE) firms in the next 12 months driven by the government's push to privatise key firms in diverse sectors such as energy, hospitality and manufacturing.
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