Markets & Finance

Local owners hold 58pc of Equity on Helios sale of stake

JM

Equity Holdings chief executive James Mwangi at an investor briefing and release of the lender’s 2015 half-year financial results in Nairobi in August. PHOTO | SALATON NJAU

The recent sale of a 24 per cent stake in Equity Bank by UK private equity fund Helios Partners has left local and East African investors holding 58 per cent of the bank, firmly making the lender a local institution.

This level was last attained in December 2011 and the bank has since verged on foreign ownership.

Helios divested its entire 905 million shares (24.99 per cent) stake in the bank through a series of sales to local and foreign institutional investors.

The latest shareholder register filed with regulators at the end of August shows Equity Bank foreign shareholders holding 1.59 billion shares in the bank. East African (considered domestic) institutional shareholders now hold 1.5 billion with individuals holding 601.6 million shares.

According to Equity Holdings chief executive James Mwangi, this has enabled the bank to deepen its institutional investor pool, which could come in handy were the bank to issue additional shares in a capital raising drive.

The funds that have invested in the bank, such as the Kenyan and Ugandan pension bodies, have committed to a longer investment horizon than was the case with the private equity fund Helios.

“We have also reduced the single largest shareholder’s holding to 12.2 per cent. This means that when it comes to raising funds or underwriting new share issues, we have shareholders with a huge ceiling in terms of ability to take up additional shares, which is important to us,” said Mr Mwangi at a recent investor briefing.

Norfund and NorFinance of Norway took up 12.2 per cent to become Equity’s largest shareholder. UK fund Genesis Investment Management LLP bought 4.2 per cent, while NSSF Kenya and NSSF Uganda, Renaissance Capital, African Alliance and Investec also took up stakes.

READ: PE Helios rakes in Sh52bn from Equity stake sale

The share has also seen consistent foreign investor net selling in the open market in recent months, having recorded net sales of about Sh5 billion ($48 million) in the eight months according to data compiled by Standard Investment Bank.

Equity’s foreign-owned stake as at June last year stood at 49.94 per cent, meaning international investors only needed to buy 2.2 million shares equivalent to 0.06 per cent of the lender’s issued stock to hit the 50 per cent mark, which would turn the bank into foreign-owned entity based on the Central Bank of Kenya classification.

According to Old Mutual Securities analyst Eric Munywoki, the banks local shareholders will draw confidence in the expansion of local majority stake in the bank.

“It is positive for the bank to have the 58 per cent held by East Africans at a time when it is expanding its regional footprint. Reducing the stake held by foreign investors also means less exposure for the share to foreign investor shocks (sell-offs) when there is a crisis in the international markets,” said Mr Munywoki.

Kenyan banks have been ramping up regional expansion as the East Africa Community common market takes shape, opening way for free movement of factors of production in a market of 130 million people.

Further in the region, Equity recently completed the acquisition of ProCredit Bank of the Democratic Republic of Congo, in a deal valued at nearly Sh6 billion ($60 million) in equity and debt.