Poll impasse stalls SBM takeover of Chase Bank

Customers at a Chase Bank branch. FILE PHOTO | NMG
Customers at a Chase Bank branch. FILE PHOTO | NMG 

SBM Holdings, the Mauritian lender that wants to take over troubled Chase Bank, last month suspended a planned inspection of the Kenyan firm, citing the unfavourable environment arising from a prolonged election period.

Sources familiar with the transaction confirmed that SBM was initially scheduled to conduct due diligence for about a month beginning October 17, but is yet to do so.

The critical review is now expected to start this week or early next week and, if the verdict is favourable, SBM is expected to then leave the Central Bank of Kenya (CBK) with a binding contract for Chase Bank, which is under receivership.

“SBM representatives were expected to have started the due diligence a week after CBK announced their intention to buy Chase, but that did not happen,” a source who cannot be named because he does not speak for any party to the transaction said.

“The main reason behind the delay has been the extended electioneering and the uncertainties arising from it. I do not think SBM will manage to complete due diligence by November 17 as was earlier targeted.”

Attempts to get a comment from SBM’s Mauritius and Kenya offices did not bear fruit by the time of going to press. The CBK declined to comment on the delay.

SBM early last month announced that it intends to acquire the carved out assets and liabilities of Chase Bank. subject to “completion of a legal and financial due diligence exercise as well as regulatory and other approvals”.

The transaction, which is to happen through the bank’s local subsidiary, SBM Bank (Kenya), will also see SBM absorb a “significant number” of Chase Bank’s 1,300 staff working in 62 branches.

The Mauritian bank is expected to focus on elimination of overlaps between its existing branch network and that of Chase Bank in the integration plan, leading to some staff redundancies.

SBM Kenya has 10 branches – six in Nairobi and four in Mombasa while Chase Bank has 62 branches in 13 towns -- most of them in Nairobi and Mombasa.

The CBK, while announcing SBM’s non-binding offer on October 9, said it expected the transaction, if agreeable to all parties involved, to be competed by the end of the year.

In order to make its initial offer, SBM and other interested bidders mainly relied on a databank made available to them by the Kenya Deposit Insurance Corporation (KDIC), enumerating, among other things, Chase Bank’s liabilities and assets.

Representatives of Chase Bank and its subsidiary, Rafiki Microfinance, also made presentations to the bidders.