Ndegwa brothers reveal Sh700 million CBA stake

NIC Group chairman James Ndegwa and his brother, Andrew Ndegwa, own 6.6 million shares worth Sh704 million in Commercial Bank of Africa (CBA) Group, according to fresh fillings.

The fresh information reveals the close historical links between the founders of the two banks ahead of their merger in July.

CBA is partly owned by former President Jomo Kenyatta’s family while NIC, which is listed on the Nairobi Securities Exchange (NSE), #ticker:NSE is controlled by the Philip Ndegwa family.

In a circular to shareholders, NIC disclosed that James holds 3.1 million shares in CBA - equivalent to a 1.09 percent stake worth Sh333.9 million - while Andrew has 3.4 million shares in the same institution, representing 1.21 percent equity which is worth Sh370.8 million.

The value of their interest in CBA is based on the lender’s net assets in the year ended December 2018.

It was not immediately clear when the brothers acquired shares in CBA but the circular shows that Kenyans became shareholders in the lender after buying out Bank of America between 1984 and 1992.

The Ndegwa family, through their investment vehicle, First Chartered Securities, also acquired their initial 12 percent stake in NIC between 1993 and 1996 by buying shares from the lender’s previous owner, Barclays Bank of Kenya.

Boost stake

James and Andrew recently acquired more shares in NIC, a move that will help boost their stake in the banking entity that will emerge from the lender’s tie-up with CBA.

The circular shows that James now holds 52.5 million shares in NIC with a market value of Sh1.8 billion, raising his ownership from 46.2 million shares last year when the bank also implemented a bonus issue of one for every ten shares held.

His ownership is higher than Andrew’s by 11,874 shares, with the younger brother having also raised his stake by the same margin since early last year.

It was not immediately clear whether the brothers bought the additional NIC shares in the open market or if they accrued as a result of changes in the ownership of their family’s investment vehicles.

The extra shares have a current market value of Sh226.1 million for each of the brothers, bringing the total to Sh452.2 million.

Once NIC and CBA are merged, the two brothers and the larger Ndegwa family will have a combined 13.25 percent equity worth about Sh8.4 billion in the merged bank.

The Kenyattas

Their level of ownership will be matched by the Kenyattas (President Uhuru Kenyatta, his brother Muhoho Kenyatta and former First Lady Mama Ngina Kenyatta).

Billionaire businessman Naushad Merali, currently a minority shareholder in CBA, will get a 2.9 percent stake worth about Sh1.9 billion in the amalgamation.Cumulatively, the current shareholders of CBA will get a 53 percent stake in the merged bank while existing NIC investors take the remaining 47 percent.

The unified lender is expected to start trading on the NSE in July with a market value of at least Sh66 billion. This is the equivalent of Sh44 per share.NIC says the merger will enhance shareholder value by raising revenue, lowering costs and increasing market share.

“It is for these reasons that the directors of NIC unanimously recommend that the shareholders vote in favour of the resolutions to be proposed at the annual general meeting,” James Ndegwa said in the circular to shareholders in his role as chairman of the board. “We confirm that the directors of NIC who have direct or indirect beneficial equity interests in the ordinary shares of NIC … will vote in favour of the resolutions.”

Third-largest bank

The merged entity will become the third-largest bank in the country with assets of Sh453.5 billion based on results for the year ended December 2018. This will see it relegate Co-op Bank to fourth place.

Co-op Bank #ticker:COOP has Sh413.4 billion in assets. KCB Group #ticker:KCB and Equity Group #ticker:EQTY rank first and second with assets of Sh714.3 billion and Sh573.3 billion respectively.

The merger is currently valued at Sh66 billion – being the book value of the two institutions.

Once the banks are merged, areas of overlap, including branch networks, technology, management and support functions are expected to be reviewed with a view to cut costs and improve efficiencies.

At the start of the integration, the company will have 2,360 employees and more than 100 branches in multiple markets including Kenya and Tanzania.

Upon completion of the transaction, the businesses will be organised into banking and non-banking operations. The banking unit will comprise lending and deposit-taking businesses.

It will also include a company to house all the digital banking services, including the microcredit platform M-Shwari which is offered in Kenya.

The non-banking division will comprise stock brokerage, property investment, leasing, insurance agency and other ventures.