KCB offers Sh5.6b for National Bank : The Standard

KCB Group will buy National Bank of Kenya (NBK) for a bargain price of Sh5.6 billion, offer documents show. The struggling lender, whose true value has been the subject of a heated public debate, with some putting it at Sh9 billion, requires more capital to meet the regulatory requirements and grow its business. Because of its cash position, NBK management now appears to be resigned to not getting an improved offer. “The board is aware that so far, no competing offers have been received, which makes it difficult to comment on the best obtainable price from the market,” said NBK Chairman Mohamed Hassan in a circular.

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The lender's shareholders will give KCB a discount of 30 per cent for every share since the latter bank will inject much-needed capital. KCB will offer Sh3.8 for every NBK share that is currently trading at Sh4 after adjusting to KCB shares that are currently trading at Sh40. One KCB share is expected to change for 10 NBK shares. This will undercut current market valuations, a further cutback after preferential shares were converted to ordinary shares. "Takeover document has clarified that KCB has valued NBK at Sh5,601,842,341. This was calculated using the volume weighted average prices (“VWAP”) of NBK shares for the 180 days up to and including 16th April 2019, upon which a discount of 30 per cent was imputed to arrive at an offer price of Sh3.801 per share," Hassan said.

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The valuation at fair value reinforces claims by Members of National Assembly’s Finance Committee that the value of the lender is between Sh9 billion and Sh15 billion, while its liabilities stand at Sh6.9 billion. The market had once valued it at Sh14.4 billion in 2011 when its shares traded at a decade-high of Sh42.73. Central Bank of Kenya (CBK) Governor Patrick Njoroge recently told Parliament that NBK was valued at Sh10 billion three years ago but had since plummeted to Sh2 billion. The bank is classified as a Tier 2 bank and ranked 13th in 2017, down from 11th a year earlier. It has a Market Share Index of 2.37 per cent. The lender’s profitability has dropped each year owing to the reduction of loans and advances to customers in view of regulatory capital requirements and the effects of the interest rate cap. “For example, the 2017/2016 financial year income for NBK fell by 11.9 per cent compared to a fall of 11.2 per cent for the entire Kenyan banking sector,” the lender said.

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KCB GroupNBKMohamed Hassan