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How Equity beat Kabila to Congo bank takeover

Wednesday, November 20th, 2019 05:28 |
BCDC majority shareholder George Forrest (seated left) with Equity Group MD and CEO James Mwangi (second right) sign an agreement for BCDC takeover in London UK. With them is Equity Group Plc non-executive vice chairman Isaac Macharia.
BCDC majority shareholder George Forrest (seated left) with Equity Group MD and CEO James Mwangi (second right) sign an agreement for BCDC takeover in London UK. With them is Equity Group Plc non-executive vice chairman Isaac Macharia.

By John Otini and agencies

Unbeknownst to many Kenyans, Equity Group Holdings, (EGH) Sh10.7 billion acquisition of Banque Commerciale du Congo (BCDC) marks the end of a major battle between two of the richest families in Congo, one of which is former President Joseph Kabila’s.

The battle for the control of BCDC, which is being acquired by Equity Bank, began in 2013 when Kabila’s family sought to buy out the George Forrest family which has a long history in Congo’s mining, construction and cement business .

The Sentry, an investigative team that tracks money in Africa, says in a report that the Kabila family, which took control of several Congolese banks between 2013 and 2017 when Kabila was president, was interested in the lender.

They formed a holdings company named Kwanza Capital in 2014 led by the former head of the Banque Internationale de Crédit Pascal Kinduelo who was acting on behalf of Kwanza Capital’s ultimate beneficiaries, says the report published on French website Jeune Afrique.

First offer

“The Kabila family and its allies, operating through an intermediary, first made Forrest an offer for Sh5 billion ($50 million) in 2013 for his family’s shares,” The Sentry writes.

However, the Forrest family reportedly “found the offer insufficient and, significantly, could not verify that the source of the funds was legitimate. Some of the funds for the purchase had been misappropriated from government coffers, according to a source with knowledge of the deal,” says The Sentry.

The second attempt to take control of BCDC was launched in 2015. The Congolese State, which owns shares in the bank, made Pascal Kinduelo chairman of the institution’s board of directors.

It was then, “according to sources familiar with the second attempt”, that Kwanza Capital was offered “a loan of between $70 million (Sh7.1 trillion) and $80 million (Sh8.1 trillion) to finance the acquisition of the Forrest family’s shares in BCDC” – by a company domiciled in Switzerland: Quantum Global.

The firm, headed by Swiss-Angolan investor Jean-Claude Bastos, managed most of the Sh500 billion ($5 billion) of the Angolan Sovereign Wealth Fund, itself then headed by José Filomeno dos Santos, the son of Angolan President José Eduardo dos Santos.

However, the two were arrested in 2018 as part of corruption investigations launched by the new Angolan president João Lourenço. They were released a few months later.

Second attempt

According to the report, the second attempt failed in early 2017, “for compliance reasons, according to sources with knowledge of the matter”; and “despite the campaign to pressure Forrest to sell”.

For the Forrests, Kenya’s Equity Bank, which had already acquired ProCredit Bank in the country, felt like a safe exit having come under pressure given that the current President Félix Tshisekedi is seen by many as a figurehead of former president Joseph Kabila.

After completion of the transaction, Equity Group will amalgamate BCDC to its existing banking subsidiary in DRC called Equity Bank Congo SA (EBC).

The Agreement is, however, subject to regulatory approvals from among others, the Central Bank of Kenya, Banque Centrale du Congo, the Comesa Competition Commission and the board approvals of BCDC and EGH.

Equity Group CEO and Managing Director James Mwangi said acquisition offers his outfit the opportunity to take further steps towards delivery of its vision of building sub-Saharan Africa’s premier financial institution through delivering innovative products and services to customers, including, in particular, the effective use of technology.

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