Financial services provider, Equity Group Holdings (EGH) has reached a pre-contractual agreement with Atlas Mara Limited (ATMA), a sub-Saharan African bank, to buy stakes in the latter’s banking units across four African countries. The acquisition, which will be done through a share swap deal worth over $105 million, puts Equity’s expansion strategy across Africa back on track.
According to Equity’s Group Chief Executive, James Mwangi, the bank’s board has cleared the management to enter into a binding term sheet with ATMA. Although the permanent contract is subject to various approvals, from regulators and shareholders as well as the finalising of details with ATMA.
“The actual aggregate consideration ultimately payable will be that set out in the detailed transaction agreements negotiated following completion of the confirmatory due diligence and may be subject to adjustment (both positive and negative),” Equity said in a statement.
The company further explained that the aggregate consideration, which is the aggregate amount to be paid to ATMA, will be “based on the performance of the target companies through consummation of the transactions and the net asset value of the banks at the time of closing relative to the net asset value they reported as at December 31, 2018.”
Once finalised, the deal will see Equity acquire fully the operations of African Banking Corporation (ABC) – owned by ATMA – in Tanzania, Zambia and Mozambique as well as 62 percent of the share capital of Rwanda’s Banque Populaire du Rwanda (BPR). Meanwhile, ATMA will be given a 6.27 per cent stake (or 252,482,300 shares) in Equity in the share swap.
Equity’s expansion plan
Equity which already has operations in six African markets laid out a $2 billion strategy in March 2015 to extend its presence into countries outside the East African Community (EAC).
With a primary focus on the Democratic Republic of Congo (DRC), Zambia and Mozambique, the plan also targeted other countries such as Malawi, Zimbabwe, Nigeria, Ghana and Cameroon. Albeit, the company announced the suspension of the expansion plan in 2016, in order to consolidate its operations in existing markets.
Last month, the regional lender announced that it has restarted the expansion plan, and the Chief Executive told The EastAfrican that the bank was looking for investment opportunities in Ethiopia as part of its push to become a Pan-African bank.
If successful, the transaction with ATMA will result in increased scale in Rwanda and Tanzania once both companies combine their operations there and will also allow Equity Group to expand its footprint in Africa, breathing some life back into its extension plan.
Kenya’s biggest bank by market value, Equity Group Holdings Limited is a financial services holding company based in the African Great Lakes region. The organisation is headquartered in Nairobi, publicly traded on the Nairobi Securities Exchange, and has a presence in Uganda, Tanzania, Rwanda, South Sudan and the DRC as well.