Equator Capital Partners, a US based private equity fund, has invested Kshs 600 mn through its ShoreCap II fund into Jamii Bora Bank, for an equity stake of 15%. The investment is by way of conversion into equity of a convertible debt Equator Capital Partners held of Jamii Bora Bank. As per our Cytonn Weekly #15, total debt was provided by Equator Capital Partners and Progression Capital Africa Limited of Kshs 1.2 bn, which was to be used to grow Jamii Bora Banks rural and urban network and also increase its capacity to lend to the SME sector, as part of their Kshs 5.0 bn financing plan.
Jamii Bora Bank, a Tier III bank, has a customer base of 400,000 customers and a network of 26 branches, and is ranked 25th out of 41 banks in Kenya with a market share of 0.5%. Earlier in the year, the bank looked to raise Kshs 5.0 bn in a mix of debt and equity, and was only successful in raising the debt component by issuing a convertible bond of Kshs 1.2 bn to Equator Capital Partners and Progression Capital Africa Limited.
The transaction details are as below:
- Equator Capital Partners is acquiring a 15% equity stake in Jamii Bora Bank for Kshs 600 mn,
- This is by way of a convertible debt into equity, following Equator Capital Partners earlier participation in the banks debt funding at an undisclosed amount,
- As at Q32016, the bank had a book value of Kshs 3.1 bn,
- As such, the transaction is being carried out at a 1.3x price-to-book valuation, relatively cheaper than the average banking sector transactions over the last three-years, which have been carried out at a price to book multiple of 1.9x.
| Acquirer |
Bank Acquired |
Book Value at Acquisition (bn) |
Transaction Stake |
Transaction Value (bn) |
P/Bv Multiple |
Date |
| Equator Capital Partners |
Jamii Bora Bank |
3.14 |
15.0% |
0.60 |
1.3x |
Dec-16 |
| SBM Holdings |
Fidelity Commercial Bank |
1.75 |
100.0% |
2.75 |
1.6x |
Nov-16 |
| M Bank |
Oriental Commercial Bank |
1.80 |
51.0% |
1.30 |
1.4x |
Jun-16 |
| I&M Holdings |
Giro Commercial Bank |
2.95 |
100.0% |
5.00 |
1.7x |
Jun-16 |
| Mwalimu SACCO |
Equatorial Commercial Bank |
1.15 |
75.0% |
2.60 |
2.3x |
Mar-15 |
| Centum |
K-Rep Bank |
2.08 |
66.0% |
2.50 |
1.8x |
Jul-14 |
| GT Bank |
Fina Bank Group |
3.86 |
70.0% |
8.60 |
3.2x |
Nov-13 |
| Average |
|
|
68.0% |
|
1.9x |
|
Key take-aways from this transaction:
- Private equity investment activity in Kenyas financial services sector is set to continue given the attractive valuations witnessed in the private sector, and,
- There is value in the banking sector. Sophisticated investors are willing to pay 1.3x book for a sector trading at 1.0x book value.
As the banking sector continues to go through transition and with the moratorium on licensing of commercial banks in Kenya, foreign investors eyeing Kenyan banking space are likely to get access to Kenyan banking space through acquisition and buying stakes in existing banks.
Disclaimer: The views expressed in this publication, are those of the writers where particulars are not warranted. This publication, which is in compliance with Section 2 of the Capital Markets Authority Act Cap 485A, is meant for general information only, and is not a warranty, representation, advice or solicitation of any nature. Readers are advised in all circumstances to seek the advice of a registered investment advisor.
