The Press statement by the Kenya Commercial Bank (KCB)announcing its move to acquire the National Bank of Kenya(NBK) through a share swap did not give much detail. The statement only said that the deal would involve 10 ordinary shares of NBK for every one ordinary share of KCB.
When the details of the transaction are finally put out, it will be interesting to see how the vexing issue of the mainly government-owned preference shares in the books of the bank — which have always been the deal breaker for investors interested in buying the bank — will be treated.
The takeover of NBK by Kenya Commercial Bank (KCB) has been surrounded by facilitating regulators and approvals in Annual General Meetings to give an impression of transparency. It is not.
The Ordinary shareholders in NBK are 48%, belonging to workers through NSSF and 30% that belongs to small shareholders. The bank also has non-convertible and non-redeemable preference shareholders who have no ownership rights under company law and CMA rules whatsoever, and are simply a glorified debt item on balance sheet.
The reason behind a listed bank that belongs to the workers of Kenya (48%), small shareholders (30%) and government (22%) being taken over at a tenth of its value and without paying a cent of cash by a bank that largely belongs to private shareholders in an very hideous unlawful is still unknown.
The Board of NBK cannot decide to sell the 22% of GoK shareholding. Public Procurements and Disposal Act and related procedures including a request for proposal (RFP) and open tender system must be conducted in an open and transparent way. This is mandatory to sell anything that belongs to GoK. How is 22% of GoK Shares in NBK being transferred by the Board of NBK?
The CBK Governor on record before the Parliamentary Finance Committee claims there is no other option for NBK but to be sold to KCB despite saying the problem is bad management. If this were the case and capital is the problem, there are dozens of other solutions capital injection being the obvious first option.
If the takeover should take place, numerous implications would follow. The merge would see a large banking entity limiting the choice of consumers and compromise the employment of the workers in these entities. CBK is failing to appreciate that KCB is already the biggest bank in Kenya and this transaction will only create a “too big to fail” banking entity. “monopoly renders people complacent and satisfied with mediocrity” – Nancy Pearcey
Equity bank was at some point interested in buying NBK and even made a bid to at the Privatization Commission, however, that did not pan out. The transaction was halted and swept under the rag with KCB enjoying favour by the CMA. There is no due diligence in this merger, the whole transaction has been suspiciously conducted. There is no question raised on the obvious undervaluation of NBK in this transaction. They should question why the depressed share price of NBK is used as the basis for selling the entity rather than the alternative valuations of using NBK’s discounted earnings potential or use of net-book value valuations options.
NBK was not mis-managed, the solutions for mis-management have not been considered and a take over would be last in list. The game plan was to starve NBK of capital, kill any management that was pursuing strategic transformation and then deliver NBK on a silver platter to its “only solution”
The public and minority investors in NBK have given misinformed consent through false crisis and fear mongering that NBK would collapse with depositors money if they do not let the takeover happen.
CBK Governor declared NBK is capital deficient and no one is willing to invest in it and therefore there are no options for it other than to sell it to KCB. KCB has been set as a saviour to a problem created internally when in fact it is a virus to grab NBK for free.
The solution to capitalization of NBK was injection of capital by the shareholders of NBK which they approved in the 2014 AGM but it was blocked illegally by the CMA in 2014, NBK had applied for a rights issue of Sh13 billion to be injected but the CMA refused to approve the capitalization prospect without any reason apparently to facilitate this scam.