Equity Group #ticker:EQTY has paid Sh1 billion less in its purchase of a controlling 66.5 percent stake in DRC’s Banque Commerciale Du Congo from George Arthur Forrest.
The move comes after the lender renegotiated the deal, citing the adverse economic effects of the Covid-19 pandemic on the target company that has become its second subsidiary in the Democratic Republic of Congo.
The parties started talks in September last year, months before the global economy was rocked by the spread of the respiratory illness.
Banks are now grappling with multiple risks including loan defaults as the disease and measures taken to control it hurts customers’ incomes.
“Equity and the seller also agreed to a reduction in the consideration from $105 million (Sh11.3 billion) to $95 million (Sh10.2 billion), both parties having taken into account the events that have taken place since the entry into the agreement and particularly that the Covid-19 pandemic is having adverse effects on the economies of the world and the economy of the Democratic Republic of Congo,” the Kenyan bank said in a statement.
Equity says the transaction is aimed at deepening its regional diversification besides enhancing scale in DRC where it already owns another bank (Equity Bank Congo).
BCDC made a net profit of Sh800 million in the half year ended June 2019 when it also held net assets of Sh8.5 billion. The two banks will soon be merged, with Equity saying it has an ambition of making the combined business the largest lender in DRC.