How pandemic recovery fuelled deal craze in 2021

The year 2021 was characterised by new significant deals across the corporate sector after a lull induced by the Covid 19 pandemic.

The merger and acquisitions activity cut across key sectors including financial services, real estate, telecommunication and agriculture. Some of the key ones included:

Unga Group sells Ennsvalley Bakery to logistics company

Unga Group exited its baking business for the second time with the sale of Ennsvalley Bakery to a logistics company, just a decade after it acquired it.

The company sold its bread business to BigCold as it sought to cut costs and improve efficiency.

The Nairobi Exchange-listed company had in 1990s sold its stake at Elliots Bakery and acquired Ennsvalley, the makers of premium bread in 2014 as it sought to diversify its income and cut overreliance on milling of maize and wheat flour.

The sale of the bakery business came at a time when bakers are struggling with high cost of production amid low demand for bread due to reduced purchasing power by consumers as a result of decreased income.

The cost of wheat at the international market, where Kenya acquires over 75 percent of its annual needs, has gone up by nearly 30 percent, prompting a price rally on the price of bread.

The company has been grappling with competition in the baking business from firms like mini bakeries, retail chains like Naivas and Quickmart as well as established bakers like Broadways, whose cost of bread is lower when compared with Ennsvalley high-end variety.

KCB buys Rwandese lender Banque Populaire du Rwanda

KCB Group buys Rwandese lender Banque Populaire du Rwanda (BPR) from London-listed financial services firm Atlas Mara Limited

KCB Group during the year completed the acquisition of Rwandese lender Banque Populaire du Rwanda (BPR) from London-listed financial services firm Atlas Mara Limited.

The acquisition is set to give KCB a larger footprint in retail banking in Rwanda, building on its existing corporate business that has been the strength of KCB Bank Rwanda.

Kenya’s high rate of financial inclusion and digital banking have forced local lenders to look outside the country’s borders for growth.

Besides the acquisitions in Rwanda and Tanzania, KCB is also interested in acquiring a bank in the Democratic Republic of Congo (DRC) where foreign exchange trades are a major source of revenue for lenders.

KCB says the acquisitions reflect its strategy of expanding its operations in the regional market. Big banks led by Equity, KCB, I&M and DTB have been deepening and expanding their presence in the region in pursuit of growth and diversification.

Uptake of financial services in the neighbouring countries are lower than Kenya, signalling future growth opportunities.

The ability to offer seamless services to clients across multiple markets is also seen as advantage in attracting and retaining multinationals.

I&M cost of buying Uganda bank rises to Sh4.1 billion

I&M Group spent Sh4.1 billion to acquire a 90 percent stake in Uganda’s Orient Bank Limited, with the cost rising from the initial estimate of Sh3.6 billion.

The Nairobi Securities Exchange-listed lender signed an agreement with the sellers to make price adjustments on account of exchange rates between the date of signing the deal and its completion.

I&M also agreed to meet the cost of post-completion integration support and to factor in Orient Bank’s net loss or net profit for the period from January 1 until completion.

I&M was running a corporate finance advisory business, I&M Burbidge Capital, in Uganda and acquisition of the bank has expanded its operations in that market.

I&M said the deal has given it access to additional loans worth Sh7.7 billion, deposits (Sh18.2 billion), 70,000 customers, 14 branches and 22 ATMs.

The company bought shares from Orient Bank’s shareholders Hemlata Karia, Jay Karia, Morka Holdings Limited, Zhong Shuang Quan, Cornerstone M8 Limited and the bank’s founder Ketan Morjaria.

Dr Morjaria, who held a 7.91 percent stake before the transaction, sold part of his shares and retains a 5.5 percent equity in the subsidiary.

Actis to buy Fairview Hotel for Sh1 billion

South African owners of Nairobi’s Fairview Hotel, Town Lodge and City Lodge Two Rivers, sold the three hotels to private equity fund Actis for Sh1 billion.

City Lodge Hotel Group put up the three Kenyan hotels and Tanzania’s City Lodge Hotel in Dar es Salaam up for sale in plans to exit East Africa after barely seven years of operation. It plans to sell the Tanzania hotel for Sh7.3 million. The company said then the East Africa units were loss-making to the tune of Sh2 billion as at the end of last year.

Ukarimu Limited and Faraja Limited are real estate funds under Actis. City Lodge Hotel says that occupancy levels have been below expectations at Two Rivers while bookings in the Tanzanian unit have been sluggish, leaving only Fairview with a robust performance.

Fairview Hotel has 127 rooms, while City Lodge Hotel at Two Rivers has 171 and Town Lodge Upper Hill 84. The firm has not however made a direct reference to sluggish business as the reason for selling the hotels which will now leave its operations in South Africa, Botswana, Namibia and Mozambique.

It said the sale was prompted by the need to reduce debt levels and eliminate operating losses.

“The board of directors of City Lodge has previously communicated its desire to dispose of the company’s entire East African hotel portfolio together in order to reduce debt levels within the City Lodge group, increase group liquidity and eliminate ongoing operating losses,” the firm said.

Allianz acquires Sh10.8bn stake in Jubilee General Insurance

German insurer Allianz completed the purchase of a 66 per cent stake in Jubilee General Insurance Limited in Kenya from the parent company Jubilee Holdings, which retained a 34 per cent stake in the business.

The Nairobi Securities Exchange-listed insurer signed an agreement to sell stakes ranging from 51 per cent to Sh66 per cent in its general insurance subsidiaries in Kenya, Tanzania, Uganda, Burundi and Mauritius for a total of Sh10.8 billion.

The deal was Allianz’s second direct investment in the country, after establishing Allianz Insurance Company of Kenya Limited as a greenfield operation in 2014. Jubilee was set to receive Sh7.75 billion in the deals with Allianz while Sh3 billion will be invested in the operating businesses in Kenya, Uganda, Tanzania, Burundi and Mauritius.

“We are pleased to embark on the first step of our strategic partnership with Allianz, which will support Jubilee’s ambition to increase insurance awareness and accessibility across East Africa by providing innovative, affordable and technically advanced property and casualty insurance products to consumers across the region,” Jubilee’s chairman Nizar Juma said earlier in a statement.