Companies

European banks make Sh3.6bn from I&M stake merger

bank

I&M Bank House in Nairobi. The bank’s shareholders approved a merger with City Trust on February 20. Photo/File

European development banks, DEG of Germany and French Proparco, have disposed of stakes worth Sh3.6 billion in I&M Bank in slightly over two months as it heads for the bourse.

German financier DEG is the latest to reduce its shares, selling nearly half its stake for Sh1.8 billion ahead of the lender’s listing at the Nairobi Securities Exchange through a merger with investment firm City Trust.

DEG sold 1.3 million shares of the mid-tier banker to Tecoma and Ziyungi Ltd which are old institutional investors in the bank.

The transaction, which was completed last month, has seen DEG’s stake in the regional lender drop to 6.25 per cent from the previous 10.7 per cent.

Proparco sold 1.3 million shares in the bank to fellow investors Ziyungi, and Minard Holdings for Sh1.8 billion on January 2.

“DEG has completed the sale of its 1.3 million shares to the investors,” said Gauri Gupta, head of corporate and strategic planning at I&M Bank.

(Read: Proparco, DEG sell Sh3.6bn shares ahead of bank listing)

The share sales have seen the combined stake of DEG and Proparco fall to 10.68 per cent from 19.77 per cent in December, with the two firms earning a 125 per cent return on their investment since 2007.

They remain with shares worth Sh4.2 billion in I&M Bank based on the lender’s set valuation of Sh40 billion though.

The share sales could be linked to a directive to the bank’s top shareholders not to sell more than half of their shares within two years after listing at the Nairobi Securities Exchange (NSE), which could have limited DEG and Proparco sales.

Proparco could only sell a maximum of 1.28 million shares while DEG could sell a maximum of 1.5 million shares (a combined 2.78 million shares) had they waited to auction their shares after listing at the NSE.

The Capital Markets Authority bars top shareholders from selling part of their stakes over a period after listing to offer comfort to minority investors and those buying the new shares.

The share sale has seen the two finance institutions fall below the threshold of top shareholders based on CMA’s definition, opening the way for them to exit the bank without restrictions.

The deals are part of transactions completed before the private bank merges with listed investment firm City Trust, a move that would see the bank list automatically at NSE by June.

I&M Bank’s shareholders approved a merger with City Trust after the investment firm’s shareholders voted in its favour at an extraordinary general meeting on February 20.

(Read: I&M Bank secures NSE listing with City Trust merger)

This means that the merger, which will see investors in the two institutions swap shares, is set to be complete on schedule subject to regulatory approvals.

The bank had said it would do a direct listing at the NSE if shareholders of the two institutions failed to approve the proposed merger, a move that would have hurt City Trust’s stock.

The investment firm is listed on the alternative market segment of the NSE and its deal with I&M Bank will help it to meet the minimum capital threshold required for listing on the main market.

City Trust’s share has gained 80 per cent in the past one year to trade at Sh448, with the rally linked to gains expected from the merger.
City Trust shareholders will see their stake in the bank grow from the current 7.28 per cent to 7.3 per cent post merger.

(Read: City Trust warns of share price risk in I&M merger)

The investment firm’s stock will also be split five times before it is swapped with those of I&M Bank.

“For City Trust, it will facilitate the increase of the shareholder base of CTL (City Trust) and thereby enhance liquidity of the company shares on the NSE,” the investment firm said in the offer document.

[email protected]