UK development finance institution British International Investment (BII) will receive Sh6.5 billion from the sale of its 10.13 percent stake in I&M Group to East Africa Growth Holding.
East Africa Growth Holding is a limited liability company registered in Mauritius and is affiliated with AfricInvest, a private equity investor with investments in more than 200 companies in 35 African countries including Kenya.
The Competition Authority of Kenya (CAK) Thursday approved the deal unconditionally. The Sh6.5 billion represents a premium price for the Mauritian-registered firm.
“This approval has been granted based on the finding that the transaction is unlikely to negatively impact competition in the market for commercial banking services, nor elicit negative public interest concerns,” said the CAK.
The valuation of BII’s stake on the Nairobi Securities Exchange is Sh3.04 billion going by the Thursday opening share price of Sh18.15, meaning that East Africa Growth Holding has paid more than twice what it would have spent if it had the opportunity to buy this in the open market. The deal values I&M at Sh30.01 billion.
It is common for such private deals to value a stake at a premium to entice the party holding the shares to sell. The valuation usually considers a mix of factors such as the potential income after the deal, the valuation of similar deals, and other benefits tied to the stake such as seats on the board.
The private transaction also allowed East Africa Growth Holdings to get a sizable stake instantly as opposed to waiting were it through the open market purchase.
The CAK said the 10.13 percent stake would grant East Africa Growth Holding rights on the appointment of board directors, drawing business plans, and making significant changes to I&M Group senior management.
“Therefore, East Africa Growth Holding will acquire indirect joint control over I&M Group with existing shareholders,” said the CAK.
The top three investors in I&M Group at the end of 2022 were Minard Holdings Limited (21.6 percent), Tecoma Limited (18.4 percent), and Ziyungi Limited (17.8 percent).
BII bought a 10.68 percent equity stake in I&M in April 2016 when it was known as the CDC Group with the investment having underlined the institution’s commitment to supporting lending to small and medium-sized enterprises in East Africa.
I&M traces its start to 1950 when it was first incorporated as City Trust Limited. The group raised its dividend payout by half to Sh2.25 per share from Sh1.50 after posting a 37.7 percent growth in net profit to Sh11.2 billion in the year ended December 2022.
