Close associates of former President Daniel Moi have received Sh1.4 billion for selling a majority stake in Transnational Bank to a top Nigerian lender.
Regulatory filings seen by the Business Daily show the Nigerian tier one lender Access Bank paid the amount to close the deal for the Kenyan bank linked with persons who were close to Mr Moi, who died in February.
The closure of the deal now paves the way for Access Bank, owned by business mogul Herbert Wigwe, to inject additional capital in Transnational, which had 0.25 percent stake in December 2018, as it seeks a return to profitability.
The price is a discount given that shareholders’ fund-- the amount of money Transnational could return to shareholders if all assets were converted to cash and all debts paid off -- stood at Sh1.82 billion at the end of March.
Top owners of the 36-year-old Kenyan bank with 28 branches were companies owned by close associates of the late Moi, including Joshua Kulei, Simeon Nyachae and the former Vice President George Saitoti.
The Competition Authority of Kenya (CAK) and the Central Bank of Kenya (CBK) early January endorsed the deal that gives Access Bank a 97 percent stake in Transnational. The bank is the largest in Nigeria with assets worth Sh1.17 trillion.
Access Bank CEO Herbert Wigwe had said the lender would buy in cash and inject fresh capital into Transnational.
“It will be paid for in cash so we have taken out the existing shareholders and we will basically inject a bit more equity into the institution,” Mr Wigwe said in a recent transcript of a conference call.
Sovereign Trust, a company associated with Mr Kulei, a former aide of the ex-President, held 23.03 per cent shareholding in Transnational.
Simbi Investors, linked with Mr Nyachae, a former Cabinet minister during Mr Moi’s administration, held 8.2 million shares or 4.11 percent of the bank.
Losupuk Ltd, associated with the late former vice President George Saitoti, holds 2.79 per cent. The bank’s chairman has been Henry Kiptiony Kiplangat, who is also the vice-chancellor of Kabarak University, an institution owned by the Moi family.
Andre DeSimone, formerly CEO of Kestrel Capital, was also a director at Transnational but retired in December 2018.
Kestrel Capital is linked to the late Nicholas Biwott, who was a powerful minister in the Moi administration.
Other major shareholders are listed as Archers and Wilcock Ltd with a 23.75 percent stake, and Kenyerere Ltd — associated with Jared Kangwana — with 2.15 per cent stake.
Mr Kangwana last year got approval to raise his stake in Maisha Microfinance Bank beyond 25 percent. He is also associated with Monarch Group, which owns Monarch Insurance and a number of real estate properties.
In total, Transnational had 18 corporate shareholders (51.4 percent) and 17 individual shareholders with a stake of 48.6 percent, all locally based.
WikiLeaks, a London-based organisation, published a 2007 report in which forensic auditors Kroll Inc linked the bank to Sh21.4 billion ($200 million) money laundering.
“An estimated $200 million of Abacha money was laundered through Kenya, using Transnational Bank and its Nostro accounts held in Frankfurt and other jurisdictions. This money was parked in off-shore accounts,” the leaked Kroll report said.
Transnational, with assets worth Sh9.7 billion, made a loss of Sh83.9 million in the financial year ended December 2019, worse from a loss of Sh71.8 million the previous year.
At the end of 2018, it disclosed that it held Sh24.7 million deposits by companies controlled by directors or their families. Deposits by companies related through control by a common shareholder or their families hit Sh1.42 billion.
The small lender started off as Transnational Finance in 1984, a non-bank, deposit-taking institution that also provided hire purchase services and other loans.
It established a separate fully fledged bank in 1985 dubbed Trans National Bank Ltd. The two financial firms merged in 1996, and Transnational Finance ceased to exist.
The buyout by Access has deepened the presence of Nigerian banks in Kenya with United Bank of Africa (UBA) and Guarantee Trust Bank already in the market. The Kenyan banking sector has witnessed increased interest in the last seven years, with mergers and acquisitions happening.
Egypt’s largest private lender Commercial International Bank in April received CBK’s nod to acquire a controlling stake in Mayfair Bank.
Other banks that have been acquired in the last seven years include Fina Bank, Giro Commercial, Oriental Commercial, Fidelity, Chase Bank, Imperial Bank and National Bank of Kenya. NIC and CBA groups last year merged to form NCBA group, marking one of the recent largest deals in the Kenyan banking sector.