Kenyan MPs block KCB's bid to buy National Bank but it may be too little too late

On Thursday, in a report tabled at Parliament, the National Assembly’s Departmental Committee on Finance and National Planning rejected the proposed buyout of NBK by KCB.
KCB Group which is Kenya’s biggest lender by assets is seeking to acquire NBK through 10 for one shares swap.
KCB’s valuation is, however, perhaps what is behind the contention by MPs to back the deal and their refusal may be simply a last desperate effort to increase the valuation.

Kenyan lawmakers have rejected Kenya Commercial Bank (KCB) quest to acquire cash-strapped National Bank of Kenya (NBK) and summarily ordered the two main shareholders - Treasury and National Social Security Fund (NSSF) - not to okay the proposed buyout, throwing a spanner in the works into the already underway multi-billion-shilling transaction.

On Thursday, in a report tabled at Parliament, the National Assembly’s Departmental Committee on Finance and National Planning said the takeover deal undervalues NBK and is not in the best interest of workers, taxpayers, NBK staff and minority shareholders.

Kenyan Parliament Building ece-auto-gen

The committee argued that the proposed buyout went against the Central Bank of Kenya’s (CBK) warning that failure to rescue NBK would lead to its collapse.

“Considering submissions by stakeholders, the committee recommends that the principal shareholders (National Treasury and National Social Security Fund (NSSF), should not accept the offer by KCB on the acquisition of 100 percent shares of NBK,” states the committee chair, Joseph Limo.

The MPs instead recommended that the government seeks cash to recapitalise NBK, a feat that the Treasury has failed to achieve in the past decade pushing the bank to the brink of collapse.

Also read: Kenya’s National Bank sends home hundreds of employees as it struggles to stay afloat leaving the fate of 650,000 customers hanging in the balance

Joseph Limo, National Assembly’s Departmental Committee on Finance and National Planning Chairman. Pulse Live Kenya

NSSF holds 48.05 percent shares of NBK, while the Treasury controls 22.5 percent, giving them 70.5 percent total ownership.

KCB Group which is Kenya’s biggest lender by assets is seeking to acquire NBK through 10 for one shares swap.

KCB’s valuation is, however, perhaps what is behind the contention by MPs to back the deal and their refusal may be simply a last desperate effort to increase the valuation.

KCB Group which is Kenya’s biggest lender by assets is seeking to acquire NBK through 10 for one shares swap. ece-auto-gen

The MPs have faulted KCB’s valuation of NBK at Sh6 billion against an independent valuation of Sh9 billion and that may be

“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,” the committee says in its finding.

KCB announced that it expects the takeover deal to close by October this year, subject to approval from shareholders of the two banks as well as market regulators.

Ukur Yatani Kanacho with Presidentn Uhuru Kenyatta. (Trendsmap) Pulse Live Kenya

Acting Treasury Secretary Ukur Yatani did not respond to media queries on whether the government will heed the directive by MPs.

Prior to the MPs refusal to back the deal, the Treasury had already thrown its weight behind the NBK takeover by KCB, saying it was the only way to save the lender from imminent collapse.