I&M ordered to retain Giro Bank staff in merger bid

The competition watchdog has in a rare move ordered listed banking services firm I&M Holdings to retain employees of a small commercial bank it has acquired, as a pre-condition for approval of the takeover.

In a gazette notice dated October 25, 2016, the Competition Authority of Kenya (CAK) said it had given the nod for the takeover subject to retention of the 108 Giro Commercial Bank employees.

“Pursuant to the provisions of section 46 (6) (c) (ii) of the Competition Act, 2010, it is notified for general information of the public that the Competition Authority of Kenya has approved the implementation of the proposed acquisition of all the issued share capital in Giro Commercial Bank Limited by I&M Holdings Limited on condition that all the one hundred and eight employees of Giro Commercial Bank Limited are retained by the post-merger entity,” said CAK director-general Wang’ombe Kariuki in the notice.

The announcement comes as huge relief for Giro Commercial Bank employees, quite a number of whom were expected to lose jobs in the buyout.

Employees routinely face redundancy after mergers or buyouts as the whole point of the process is to achieve efficiency through cost cutting.

Many banks are expected to reduce their staff following recent capping of interest rates. The CAK precondition, however, is likely to dissuade lenders from taking over small and medium banks, already finding survival hard as banking changes to a volume game. Some of them are cutting work force and branch networks.

READ: I&M values Giro Bank at Sh5 billion in buyout deal

Equity Bank, the largest retail player, has so far said it will no longer open branches signalling that big banks may not be interested in increasing their physical presence through buyouts.

I&M Holdings, whose flagship subsidiary is the commercial bank trading under a similar name, agreed to acquire Giro Commercial Bank in a cash and share sale deal valuing the tier II lender at Sh5 billion in a process that began last year.

I&M asked to pay Sh2.5 billion in cash and offered owners of Giro Bank a minority stake in a Sh2.5 billion share deal. The NSE-listed lender created 21,043,330 new shares valued at Sh121.05 each to be used in the transaction.

Giro, ranked 27 out of 43 banks in Kenya, has a 0.49 per cent market share with 9,000 customers served through seven branches.
I&M ranks 10th with a market share of 4.1 per cent.

Giro recorded a net profit of Sh452 million last year, with customer deposits of Sh12.8 billion and a loan book of Sh9.3 billion

Last year I&M also triggered the process of acquiring a 65 per cent stake regional financial advisory firm Burbidge Capital.

It earlier bought out Biashara Bank in 2003, and five years later acquired a 50 per cent stake in First City Bank of Mauritius and rebranded it Bank One Mauritius.

That acquisitions preceded the buyout of CF Union Bank of Tanzania in 2010, which now trades as I&M Tanzania.

Three years ago, I&M Group acquired a controlling interest in Commercial Bank of Rwanda that has since been rebranded I&M Rwanda.