NBK shares have only 2 days to trade at Nairobi bourse

The National Bank of Kenya (NBK) #ticker:NBK is set to be delisted from the Nairobi Securities Exchange (NSE) by the end of next month as the takeover bid by KCB Group #ticker:KCB enters the home stretch.

In a notice published Wednesday, KCB said the NBK shares will be suspended from trading on the NSE from Monday, September 2. It expects to list the additional shares through which it is executing a swap for NBK’s equity on September 30.

KCB disclosed that it has so far received acceptances in respect of 262.97 million shares, equivalent to 77.62 percent of NBK’s total of 338.8 million issued shares. This indicates that the government, which controls 70.6 percent of the lender through the Treasury’s 22.5 percent shareholding and National Social Security Fund’s 48.1 percent stake, has officially rubberstamped the sale.

The offer remains open until 5 p.m Friday. Effective ownership by the government is, however, higher when one considers the 1.135 billion preference shares held by the Treasury and NSSF that are due to be converted to ordinary shares if the buyout is successful.

NBK’s board and shareholders have already approved the conversion at a ratio of one to one, which will raise the stake held by the government to 93.23 percent.

This huge stake held by the government is what will allow KCB to waive the requirement to seek shareholder approval before the delisting of NBK.

KCB has already hit the minimum threshold of 75 percent required to declare the offer a success, and trigger the conversion, which would in turn push the acceptance level above the 90 percent mark that allows KCB to compulsorily buy out any dissenting NBK shareholders.

“The resolution requiring shareholder approval for delisting of NBK from the NSE was not presented to the shareholders of NBK for approval at the annual general meeting held on June 14, 2019,” said KCB in the notice yesterday. “Noting that the conditions relating to delisting and acceptances are legally capable of waiver, KCB has determined to waive the two conditions.

At the appropriate time, KCB will seek the requisite corporate and regulatory approvals for the delisting of NBK.”

Failure to hit the 90 percent threshold has in the past derailed delisting plans of NSE firms, such as the recent examples of Unga Group #ticker:UNGA and Express Kenya #ticker:XPRS where minority shareholders held out against deeper-pocketed buyers to keep the firms public.

NBK had already notified its shareholders in a circular last month that there would be no extraordinary general meeting (EGM) to approve the delisting, and that KCB would be required to waive this condition. Under the terms of the offer, NBK’s owners will receive one KCB share for every 10 NBK shares they own, with the tier one lender set to allocate a total of 147.34 million units if the offer receives full acceptance from NBK shareholders.

Following the closure of the offer period on Friday, NBK shares will be suspended from trading at the NSE starting Monday. The announcement of the offer results will be made on September 13, while the swapped KCB shares will be credited into the accounts of NBK shareholders on September 27 before they get listed on September 30.

The delisting of NBK will mark the second major exit from the NSE in just over a month, following the delisting of oil marketer KenolKobil last week following a buyout by French firm Rubis Energie. NBK was set up in 1968 as a wholly-owned government lender, meant to help open up greater access to credit by Kenyans in order to build up the economy after Independence.

The lender was listed in 1994 when the government offloaded a 32 percent stake in an IPO, before a further cut in its holding over the years to the present 22.5 percent that is held by the Treasury. The lender’s past legacy of bad loans dished out to politically-correct individuals without any collateral, who later defaulted on the debts, has finally caught up with it.

The rate of loan defaults at NBK is about four times the banking industry’s average of 12.8 percent, Prominent individuals including politicians took large loans from NBK, mostly during the President Daniel arap Moi administration, and deliberately failed to repay them, according to records tabled in Parliament. More recent leadership of NBK has also been accused of also accused of mismanagement, undoing the recovery that had been seen from 1999 when former CEO the late Reuben Marambii was appointed to rescue the lender that was surviving on the Central Bank of Kenya’s support.