High Court freezes Equity acquisition of Spire Bank


Spire bank branch on Koinange Street in Nairobi. FILE PHOTO | NMG

The High Court has frozen Equity Bank’s acquisition of Spire Bank amid a dispute over the fate of employees in the troubled lender.

Employment and Labour Relations Court judge Maureen Onyango ruled that the lenders should maintain the status quo until a deal is agreed with the employees.

Spire Bank’s employees through the Bank Insurance and Finance Union (BIGU) sued to block the acquisition, arguing their employer had kept them in the dark over the acquisition.

Read: Equity Spire deal hit roadblocks in board resignation, union suit

The deal will see Equity, which has a Sh1.3 trillion asset base, take over Sh945 million in loan assets from struggling Spire Bank and deposit liabilities of Sh1.3 billion.

Mwalimu Sacco, the majority shareholder in Spire Bank, will pay Equity Sh1.7 billion to cover liabilities.

“That in the meantime, status quo as of the date of this court’s orders to be maintained until either party agrees on suitable undertaking, and is signed by the respondent (union),” Justice Onyango said.

The case will be mentioned on October 31 to see whether the union and the lender would have reached an agreement. The court dispute looks set to delay the regulatory approvals from the Central Bank of Kenya (CBK) and the Competition Authority of Kenya (CAK).

The banking regulator had welcomed the planned acquisition of Spire Bank, arguing it would enhance the stability of the Kenyan banking sector. Equity becomes the latest tier-one bank to buy a struggling lender in search of new growth opportunities after KCB, which recently acquired the National Bank of Kenya (NBK).

In December 2014, Mwalimu, which is owned by teachers, first acquired a 75 percent stake in the lender, which was then operating as Equatorial Commercial Bank.

Read: Equity locks in teachers with Spire Bank purchase

In 2020, it acquired the remaining 25 percent, offering it full control of the loss-making bank.

Teachers have, however, pumped billions of shillings into the bank bought from the late Naushad Merali for Sh2.4 billion.

Over the last couple of years, Spire Bank’s accumulated losses of up to Sh9 billion have wiped out shareholder funds. This means that the teachers’ investment in the bank has been wiped out. The union through the first deputy general secretary, Tom Odero, said the employees had not been involved in the acquisition.

He said the union wrote to Spire Bank on April 4 after word went round that Equity was interested in acquiring the loss-making bank.

The union is apprehensive that its members might be left jobless before agreeing on terms.

Mr Odero said a clause in the CBA states that the union must be involved in material events like disposal of shares and in case of redundancy, and must be told the reasons and extent of the dismissal.

“It is quite clear that the lender is being acquired without stating the fate of the union members, which is a bad labour practice to ignore the employees,” he said.

Equity had hoped to inherit over 20,000 depositors and 3,700 loan customers in the teachers-owned Spire Bank by November after signing a buyout deal last month.

The deal is expected to give Equity a new foothold in the race for the teachers’ client base, with the purchase making it home to over 100,000 teachers accessing its services across the country.