National Bank boss fights removal after KCB buyout

National Bank of Kenya MD Wilfred Musau is fighting the decision by KCB Group to replace him following the buyout deal.

The move now sets the stage for a confrontation or compensation for the two years remaining on his term.

In an interview with the Business Daily Thursday, Mr Musau insisted that he remains in-charge of NBK just days after KCB tapped its executive, Paul Russo, as the designate managing director for the transitional two-year period ahead of the merger of the two lenders.

He spoke on the same day KCB released the results of its buyout of NBK, in which it revealed that shareholders owning 297.1 million shares in NBK had accepted to swap them for KCB shares.

NBK had 338.8 million shares, meaning that the transaction was 87.7 percent successful.

“Corporate and regulatory approvals from the Central Bank of Kenya and the Competition Authority have also been received,” the bank said in a notice.

Premature announcement

This notwithstanding, Mr Musau has termed the KCB move to announce Mr Russo as head of NBK as premature, arguing that he will only be free to hand over to a new board and within the terms of his contract. Mr Russo is awaiting a “fit and proper” approval by the Central Bank of Kenya (CBK).

“My take is that they did the appointment from their side but I think it was premature,” Mr Musau said Thursday in a telephone interview.

“As far as I am concerned, I am still running the company; there is a process to be followed that includes handing over to the new board of directors.”

On Monday, the CBK approved the acquisition but KCB Group is yet to announce a new board that will shepherd NBK for the next two years.

Mr Musau was appointed in October 2016 for a five-year period that now coincides with the transitional period as KCB Group completes the 100 percent take-over of NBK.

However, KCB on Monday announced that Mr Russo, who is the group’s director of regional businesses, would lead the transition team “that will report to the KCB Group Chief Executive Officer and Managing Director Joshua Oigara”.

The Business Daily was not able to obtain the exact details of Mr Musau’s exit terms based on his 2015 contract.

The decision by KCB to replace him means that he will either be paid-off for the two years remaining on his contract or in line with the terms of his contract.

Mr Musau earned a total of Sh50.25 million in salary and allowances after his salary was increased by 4.56 percent in 2017.

Last year, NBK increased his salary to Sh3.45 million from Sh3.2 million in 2017 but maintained expense allowances at Sh725,000 per month.

Fixed terms

This means Mr Musau was due to earn more than Sh100 million over the remaining two years, a payment lawyers say is in line with positions that have fixed terms like that of CEO.

“He could be paid for the remainder of his term because his job was not permanent. Again he is exiting because of the action of the employer in this case an acquisition and not redundancy,” said Titus Koceyo, the managing partner of Koceyo and Company Advocates.

Mr Musau becomes the highest-ranking victim of the takeover where KCB had said the two-year transition period would serve to “streamline human resources, systems, processes and procedures” to realise efficiency and productivity synergies.

“During that period (transition period) we will be taking a number of integration decisions, including how to best structure NBK in order to more excellently deliver value to our customers,” Mr Joshua Oigara, the KCB chief executive, said earlier.

Mr Musau, however, failed to clear the air on the options available to him following the exit that prematurely ended his contract.

Mr Musau was tasked with turning around the mid-sized lender back to profitability, raising fresh shareholder capital, reviewing risk control, and enforcing strict governance rules when he was appointed in October 2015.

He replaced Munir Ahmed who left the bank after being accused by the market regulator of overstating NBK’s profit in the first-half and nine-month periods of 2015.

Sh1.1bn loss

Later, the audited accounts for the full year showed a loss of Sh1.1 billion.

Mr Musau managed to return NBK to profitability but did not manage to raise fresh capital. This is one of the failures that made the bank a target for acquisition by KCB.

The acquisition was promoted as a rescue deal aimed at pulling NBK out of its perennial low liquidity troubles.

Under the deal, KCB offered to buy NBK through a share swap of one KCB share for every 10 of NBK, joining a wave of consolidation in Kenya’s banking industry.

With the take-over, the group will now delist NBK’s shares from the Nairobi bourse and run the bank as a stand-alone subsidiary before integrating its operations within about two years of the acquisition.

On Thursday, KCB said its purchase of NBK preference shares, which are owned by the Treasury and the National Social Security Fund (NSSF), will push it ownership to 97.1 percent, allowing it to forcefully acquire the dissenting NBK shareholders who are still holding a 12.3 percent stake.

“KCB…shall apply the provisions of the Companies Act to compulsorily acquire the remaining 41.6 million issued ordinary shares of NBK,” said KCB in a notice appearing in today’s Daily Nation.