The National Assembly has rejected the Kenya Commercial Bank’s (KCB) proposed buyout of the National Bank of Kenya, which is 70.5 percent owned by the government, in a move that puts the fate of the ongoing transaction in limbo.
Parliament’s Departmental Committee on Finance and National Planning has instructed the Treasury and the NSSF, which holds 48.05 percent and 22.5 percent stake in the company respectively, to ignore the takeover transaction as it undervalues the National Bank of Kenya’s value by approximately Ksh. 3 billion. Parliament’s valuation of NBK stands at Ksh. 9 billion while KCB values the lender at Ksh. 6 billion.
“The offer given by KCB does not reflect fair value of NBK. There was no competing bid by the time the Committee was through with the investigation. Considering submissions by stakeholders, the committee recommends that the principal shareholders (National Treasury and National Social Security Fund), should not accept the offer by KCB on the acquisition of 100 percent shares of NBK,” the committee chair, Joseph Limo says in the committee’s findings.
The committee has similarly urged the government to seek other ways to fund the NBK in order to revitalize the bank’s fortunes which have been on a steady decline for the better part of a decade.
In May, KCB offered to buy National Bank of Kenya through a share swap of one KCB share for every 10 of NBK and with the buyout having been sanctioned by the Capital Markets Authority (CMA), the two lenders are rushing to beat the September 2019 deadline set for completing the process.
Conversion of NBK preference shares into ordinary shares is already open for acceptance by NBK’s shareholders with KCB’s Chief Executive Officer Joshua Oigara chairing the team in charge of overseeing the trading of shares. If accepted by the bank’s shareholders, the conversion of NBK preference shares will see NSSF and the Treasury attain an increased 93.23 per cent stake in the company taking them above the minimum legal threshold required for a takeover transaction to be declared successful.