Jamii Bora’s Shareholders Give Greenlight for Co-op Bank to Acquire 99% Stake

Jamii Bora Renamed Kingdom Bank after Co-op Buyout

Shareholders of Jamii Bora Bank (JBB) approved Co-operative of Kenya’s offer for Kshs 1.0 billion for a 90.0 percent stake in the bank.

Dr. Gideon Muriuki, Co-op Bank Group CEO disclosed that through an Extra-Ordinary General Meeting held on 1st July 2020, its offer was unanimously approved to acquire 90 percent of the lender. 

Jamii Bora Bank, with over 444,000 customers and 17 branches employs over 190 staff, has faced liquidity shortfalls that remain below the regulatory threshold. Its core target market is the Medium, Small and Micro Enterprises and specialises in short term trade finance.

The move will see Co-op bank expand its customer and asset base in the region to over 470 billion shillings. 

“This acquisition will strengthen both institutions in leveraging on the Co-operative Bank’s well-established universal banking model as well as our successful business transformation agenda,” said Dr. Muriuki.

According to the transaction details, it will involve the issuance of additional 224.1 million new Class A shares to Co-operative bank, subject to Co-operative Bank paying the aggregate subscription price of Kshs 1.0 billion, effectively valuing the new shares at Kshs 4.46 per share.

In addition, the existing issued 24.9 million shares in JBB of Kshs 66.0 per share will be reclassified to Class B and will retain their existing rights. As a result, it will increase JBB’s total shares outstanding to 249.0 million shares from the current 24.9 million shares, and current shareholders will be diluted to 10.0 percent.

Initially, the Commercial Bank of Africa had proposed a 1.4 billion shillings cash offer to acquire JBB. However, it dropped its acquisition bid and instead merged with NIC Bank to form NCBA Group. 

Co-op Bank and JBB now wait for requisite regulatory authorities- Central Bank of Kenya (CBK), Competition Authority of Kenya and the Capital Markets Authority.

In the first quarter of 2020, Co-op bank was ranked second among the tier one banks for having improved their Gross non-performing Loan(NPL) ration from 11.2 to 10. 8 percent.

The Bank posted a profit of KSh20.7 Billion as of December 31, 2019. 

“On April 23, 2020 we paid out over KSh5.9 billion in dividends to our shareholders,” read a statement from Co-op Bank.

“The acquisition of the bank at a discount is reflective of Jamii Bora Bank’s financial performance, having recorded losses of Kshs 51.3 million in Q1’2018, and Kshs 96.8 million in Q1’2017, coupled with the Bank’s capital position. In our view, the acquisition will have little impact on increasing Co-operative bank’s market share and is more likely a rescue deal,” Cytonn Investments said in relation to the transaction.

Further, according to Cytonn,  continued bank consolidation efforts in Kenya will lead to a stable banking sector, as consolidation continues to eliminate weaker banks.  “In our view, banks will continue to consolidate to form strategic partnerships and well-capitalized entities capable of navigating the relatively tough operating environment induced by stiff competition.”