Family Bank of Kenya has raised Sh8 billion through a private placement with the entrance of new owners diluting older shareholders, including the family of its billionaire founder, Titus Muya, even as the mid-sized lender eyes listing on the Nairobi Securities Exchange.
The private placement, which saw the bank offer new shares to a select group of sophisticated investors, was oversubscribed by 31.4 percent, with investors offering the lender Sh8 billion against a target of Sh6.09 billion.
Family Bank, which plans to list at the Nairobi bourse by mid-next year, said the bulk of the new shares offered were bought by fund managers, pension funds, insurance companies, and wealthy individuals.
The bank plans to use the funds for digital transformation, lending activities, and business expansion both locally and regionally.
“Family Bank has successfully completed its private placement of ordinary shares, raising Sh8 billion against a Sh6.09 billion target, achieving an oversubscription of 131 percent,” said Family Bank chief executive officer Nancy Njau.
“The additional equity significantly bolsters our capital ratios, accelerates lending to priority sectors such as micro, small, and medium enterprises, green financing, women, and youth-led enterprises. This successful raise positions Family Bank strongly for sustained growth and enhanced shareholder value,” she added.
Sources in the bank said current shareholders did not participate in the placement, allowing them to be diluted by new entrants.
Top ownership of the bank is dominated by Mr Muya, and his family. Dilution of the family stake has been a secondary goal in the bank’s capital raising ventures.
Mr Muya owns 5.6 percent of the bank directly, while his company, Daykio Plantations, owns 12.1 percent. Persons associated with him, such as Brian Muyah, Ann Muya, Mark Keriri, and Sheila Kahaki Muya, have a 2.6 percent shareholding each.
Kenya Tea Development Agency Holding Limited is the largest single shareholder with a 16.2 percent stake.
“For existing shareholders, the planned listing creates an opportunity for improved liquidity and better price discovery of the stock, including a dilution pathway (if it involves fundraising), for investors looking to comply with maximum shareholding requirements by the Central Bank of Kenya,” said Standard Investment Bank in a note to investors.
Family Bank, which has already contracted advisors to guide it in the listing process, will be listing by introduction, meaning it will not be raising new capital in the process.
Currently, the bank's shares are traded in the Over-The-Counter (OTC) market, limiting its liquidity. Listing by introduction will provide liquidity of the share and bring on board other investors who would otherwise not invest in the stock, while in the OTC market.
Before the private placement, the bank had 1,305,195,209 issued shares, which traded at an average of Sh16 each in the OTC market, valuing the bank at Sh20.8 billion.
Results of the private placement provide a huge boost for the bank, whose rights issue conducted last year had flopped, raising Sh252 million against a target of Sh9.3 billion.
The bank has enjoyed huge growth in the last year, pushing it to raise its capital buffers to support the business.
Family Bank reported a 56 percent increase in net profit for the nine months to September on the back of earnings from government securities.
The bank reported a net profit of Sh3.5billion, up from Sh2.3 billion in a similar period a year earlier. The bank’s improved performance was on the back of a 43.1 percent jump in interest earned from Treasury bills and bonds to Sh5.5 billion, up from Sh3.8 billion.
Family Bank is eyeing regional expansion with Uganda and the Democratic Republic of Congo on its radar.
