Nedbank Group will spend a maximum of Sh31.6 billion in the cash component of its buyout of a 66 percent stake in NCBA Group, creating more room to pay investors who will not be able to take up shares in the South African firm.
The cash offer has grown by Sh9.7 billion from the Sh21.9 billion initially indicated, giving Nedbank more flexibility in receiving acceptances from small investors and major institutions constrained from investing in Johannesburg Stock Exchange-listed companies.
Nedbank disclosed to investors on Tuesday that the cash amount will not exceed Sh31.6 billion, setting the boundaries of the cash-and-stock transaction.
The multinational added that it will issue a maximum of 43.8 million of its shares to NCBA shareholders who will accept its offer.
It has offered to buy 1.087 billion shares of NCBA in cash (20 percent) and the remaining 80 percent in its own stock, with the deal valued at a total of 13.9 billion South African rand (Sh109.6 billion at current exchange rates).
This placed the cash component at around Sh21.9 billion but Nedbank has opted to raise the cash payment option to Sh31.6 billion to accommodate NCBA investors who will not be taking up its shares.
The structure of the offer has set an ownership threshold that limits those who would be eligible to less than 200 Nedbank shares to take their compensation purely in cash.
It also allows institutional investors whose mandates prohibit them from holding Nedbank shares to also be paid only in cash even if they have substantial investment in NCBA that would otherwise entitle them to a significant ownership in the South African firm.
NCBA investors can tender 66 percent of their shares to Nedbank. Out of this pool of shares, 80 percent of the units will be converted into Nedbank shares at a rate of 4.02994 shares for each 100 shares.
The Nedbank shares are priced at 250 rand (Sh1,928.5) using the deal's exchange rate.
The remaining 20 percent of the shares were to be bought in cash at a rate of Sh2,100 for each 100 shares or Sh21 apiece.
Those whose holdings are not large enough to secure them at least 200 Nedbank shares will receive only a cash price of Sh105 per share for the stocks they will have tendered. This rule applies to those with less than 9,400 NCBA shares.
The move to offer a higher all-cash offer to small investors is seen as making it easier for them to realise the value of their shares.
Converting a small portfolio of NCBA shares into Nedbank stock is likely to be uneconomical. Unlike the top NCBA investors who have committed to sell their shares to Nedbank, many retail shareholders may also not be willing to invest in the South African bank.
The cash-only option is also open to shareholders who are not allowed to take up Nedbank shares due to various reasons.
“NCBA shareholders who are institutional shareholders and have accepted the offer, but due to applicable laws or regulations in Kenya binding on them cannot invest offshore and would therefore be restricted from taking up shares listed on the JSE, shall be paid their full consideration in cash,” the multinational said.
Nedbank added that the accommodation of this category of shareholders will be subject to confirmation of their investment restrictions besides the overall cash impact being acceptable to the South African firm.
Investors taking up Nedbank’s standard offer of 80 percent compensation in stock and 20 percent in cash will benefit from taking ownership in the South African firm at a significant discount.
At 250 rand per share, they will be allocated the units at a discount of 19.2 percent compared to Nedbank’s share price of 298 rand on midday trading session on Tuesday.
Nedbank is guaranteed to secure a controlling stake of at least 51.17 percent in NCBA after receiving acceptances from top shareholders of the Kenyan bank holding an aggregate of 77.54 percent.
The multinational says it expects the buyout of NCBA to be completed by September, by which time the two banks are expected to have declared and paid their final dividend for the year ended December 2025.
The transaction will, however, have an impact on the next interim dividends, with Nedbank saying that an accepting NCBA shareholder will receive a dividend from either of the banks but not both in the same financial period.
The multinational said the acquisition gives it an opportunity to grow in the East African region through NCBA’s established operations. “The proposed deal brings together two organisations with highly complementary strengths,” Nedbank said.
“NCBA offers a strong brand presence, an extensive regional network, advanced digital capabilities and deep client reach, which naturally aligns with Nedbank's established corporate investment banking expertise, cross-border structuring capabilities, and strong balance sheet.”
