Co-operative Bank taps Jamii Bora bank in deal
Steve Umidha @UmidhaSteve
Co-operative Bank of Kenya has been given the green lights to purchase majority stake in Jamii Bora bank for Sh1 billion, paving the way for completion of the deal.
An announcement made on Wednesdayduring the bank’s annual general meeting saw shareholders approve an offer to acquire 90 per cent of Jamii Bora’s stake through subscription of 224,153,154 new class of ordinary shares.
The move will enable Co-op Bank which has Sh470 billion asset base to inject capital to the tune of Sh1 billion, and subsequent appointment of a board to run the new business.
“This acquisition will strengthen both institutions leveraging on the Co-operative Bank’s well-established universal banking model as well as our successful business transformation agenda, riding on the bedrock of the 15 million member co-operative movement and a Sh470 billion balance sheet,” said Co-op Bank’s chief executive officer Gideon Muriuki.
The agreement is however, subject to regulatory approvals by the Central Bank of Kenya, Capital Markets Authority (CMA) and the Competition Authority of Kenya (CAK).
It is is seen as a good fit into Co-op’s business model that already enjoys popularity from cooperative movements and small and medium sized enterprises (SMEs) where Jamii Bora operated.
Last year January, Jamii Bora received a cash offer of Sh1.4 billion from then CBA but the deal flopped with CBA subsequently merging with NIC to form NCBA Group.
The acquisition is expected to strengthen the balance sheet of both lenders leveraging on Co-operative Bank’s well-established universal banking model.
Co-op Bank reported a Sh20.7 billion profit for the period ending December 31, 2019 and in April this year paid out dividends worth over Sh5.9 billion to shareholders.
The deal will see Jamii Bora join a family that includes Co-operative Bank of Kenya Limited, Co-optrust Investment Services Limited, Co-op Consultancy and Insurance Agency Limited, Kingdom Securities Limited and Co-operative Bank of South Sudan Limited.
This is the first acquisition for Co-op Bank, which has preferred to grow organically in the local financial market, contrary to strategies by its top rivals KCB Group and Equity Group that have essentially relied on acquisitions to expand their regional footprint.
Co-op Bank will be issued with 224.1 million new “Class A” shares equivalent to 90 per cent shareholding shrinking the stake of existing shareholders to 10 per cent.
Jamii Bora Bank is a fully-fledged Commercial Bank regulated by the Central Bank of Kenya, and has over 444,000 customers in 17 branches and employs over 190 people.