NBK deal to raise State’s stake in KCB to 28pc

The Government will raise its stake in KCB #ticker:KCB to a new high of 27.92 per cent once its ownership in National Bank of Kenya (NBK) #ticker:NBK are converted into shares of the country’s biggest bank.

The State currently holds a combined 93.23 per cent interest in NBK through the National Treasury and National Social Security Fund (NSSF) which it controls.

The all-stock buyout of NBK will entitle the two institutions to an additional 4.27 per cent equity in KCB where they already hold a combined 23.65 per cent stake, effectively raising their interest to 27.92 per cent.

This will cement the Government’s control of KCB where the rest of the shareholding is highly fragmented across institutional and individual investors.

A circular to NBK investors shows how the conversion of large volumes of preference shares held by Treasury and NSSF into ordinary stock will see the institutions take nearly full ownership of the bank before their holdings are ultimately swapped into KCB shares.

The NSSF currently holds a 48.05 per cent stake in NBK but this will drop to 26.99 per cent once the retirement fund converts its 235 million preferred stock into ordinary units.

In contrast, Treasury’s equity will surge from the current 22.5 per cent to 66.24 per cent once its 900 million preference shares convert into ordinary stock. NBK says the institutions have sufficient power to proceed with the proposed buyout by KCB even if the remaining shareholders with a combined 6.77 per cent interest are opposed to the deal. “Upon re-designation of the preference shares on the one/one basis following completion and assuming that KCB receives acceptances only from the Cabinet Secretary to the National Treasury and the NSSF, the KCB’s aggregate shareholding in the company will be 93.23 per cent,” NBK says in the circular.

“All the other shareholders will be left with a residual interest of 6.77 per cent.”

NBK’s board of directors has unanimously recommended that the shareholders vote in favour of the deal. NBK says the proposed transaction currently values each of its shares at either Sh3.78, Sh4 or Sh4.49 based on various scenarios. The exact pricing is expected to be disclosed soon.