Atlas Mara Ltd, the African banking group started by former Barclays Chief Executive Officer Bob Diamond, agreed to sell its Rwandan and Tanzanian operations as the lender started talks with debt holders about upcoming repayments.
The group operates in Tanzania as BancABC. Kenya’s biggest bank KCB Group Plc will buy a 62.06 per cent stake in the Rwanda business and Atlas Mara’s Tanzanian unit to further expand its operations in the East African region, the Nairobi-based company said.
It agreed to pay 1.09 times book value for Banque Populaire du Rwanda Plc and 0.42 times for African Banking Corp Tanzania, it said in a statement Thursday.
The deal is part of London-listed Atlas Mara’s strategy of paring back on its African foray after Diamond, 69, misjudged competition on the continent and paid too much for acquisitions.
The onset of the coronavirus pandemic has accelerated the need to reposition the company, which has seen about 96 per cent plunge in its stock since it started trading toward the end of 2013. Atlas Mara’s shares have plunged since it first started trading.
“The board is committed to exploring all avenues to ensure our core franchise is positioned to weather this downturn,” Atlas Mara’s Chairman Michael Wilkerson said in a separate statement. It is engaged in talks with principal holders of convertible bonds due Dec. 31 and other creditors “regarding a range of options to address the upcoming debt maturities for the benefit of all stakeholders.”
If the deal with KCB is successful, Atlas Mara would be left with operations in Nigeria, Botswana, Zimbabwe, Zambia and Mozambique.
The total combined value for the two units will be about $40 million, split at $32 million for the Rwandan unit and $8m for Tanzania, Chief Finance Officer Lawrence Kimathi said on a call.
The lender targets to complete the deal within six months, he said.
For KCB, which has a presence in six countries and a representative office in Ethiopia, the deal will make it the second-largest bank in Rwanda once it has combined Atlas Mara’s subsidiary with its own, Chief Executive Officer Joshua Oigara said in its statement.
In Tanzania, where KCB is already active, the merged entity will rank among the top 10 banks.
“On a headline basis, KCB appears to be overpaying for these acquisitions,” Nairobi-based Kestrel Capital said by email. “However, KCB’s subsidiaries in these two countries appear to be more efficient than their targets and would suggest a positive purchase.”
The lender stepped in after talks with its Nairobi-based rival Equity Group in June ended negotiations to take over Atlas Mara’s entities in Rwanda, Tanzania, Zambia and Mozambique.
KCB is targeting to make 25 per cent of its total income from regional business from 10 per cent currently, Oigara said on a call.
“The transaction fits within the group’s expansion strategy and will see us increase our market share and distribution network across Rwanda and Tanzania,” KCB’s CEO said.
It will also position “the bank for sustainable growth in the long-term.