Equity deal adds 2,641 new staff to payroll

Equity Group #ticker:EQTY is set to add 2,641 new employees on its payroll with the acquisition of stakes in four regional banks from the London-listed Atlas Mara, raising the Kenyan multinational’s total staff count to nearly 9,000.

The Nairobi Securities Exchange-listed banking group is set to buy a 62 percent stake in Banque Populaire du Rwanda and take full ownership of BancABC Tanzania, BancABC Mozambique and Atlas Mara Zambia in a share swap deal valued at $105.4 million (Sh10.7 billion).

The operation in Rwanda has a staff count of about 1,000, followed by Zambia (831), Tanzania (532) and Mozambique (278) in the year ended December, according to disclosures in Atlas Mara’s latest annual report.

Equity had 6,318 employees in the same period, making it the largest employer among banks and ahead of KCB Group whose staff count stood at 6,220.

The acquisition will expand Equity’s payroll to 8,959 workers.

The Kenyan bank has said it intends to merge its subsidiaries in Rwanda and Tanzania with those of Atlas Mara’s units in those markets to cut costs and enhance scale.

The four banks to be acquired by Equity have a total of 822,000 customers, a loan book of Sh51.8 billion and deposits amounting to Sh96 billion.

Some of the units are in losses and, in aggregate, the four lenders reported a low return on equity of two percent in the review period.

Equity will, however, acquire the subsidiaries at an unspecified discount to account for their weak performance.

Atlas Mara, which has pointed to the capital and liquidity support required by the subsidiaries, sees the transaction as an opportunity to take a stake (6.27 percent) in one of the most profitable banks in the region.

“Over time the proposed transaction is expected to be substantially value-enhancing for Atlas Mara, notwithstanding any potential near-term accounting loss as a result of the discount to gross book value,” the group said in the report.

“Atlas Mara will become a meaningful shareholder in one of Africa’s most successful and well-run banks.”

The multinational is expected to write off more than Sh3 billion of the premium it had paid in acquiring the subsidiaries that it is selling to Equity.

Atlas Mara could further raise its ownership in Equity by buying more shares for cash, in line with the terms of the deal.

The multinational, whose office is in the British Virgin Islands, could receive further unspecified compensation from Equity in the future conditional on improved performance of the subsidiaries it is offloading.

For Equity, the deal expands its operations to Zambia and Mozambique, adding to its current presence in Kenya, Tanzania, Uganda, South Sudan, Rwanda and the Democratic Republic of Congo (DRC).

Equity is expected to call for an extraordinary general meeting in the coming months to approve the proposed transaction, which will result in a small dilution of existing shareholders.

The proposed deal affirms the Kenyan lender’s increased preference of using shares to fund acquisitions.

It partly financed its 2015 acquisition of an initial 79 percent stake in DRC’s ProCredit Bank by issuing 70.8 million of its shares to some of the subsidiary’s owners who ended up with a 1.8 percent stake in the Kenyan banking multinational.

The DRC deal has proved to be profitable, with the subsidiary now operating as Equity Bank Congo reporting the largest pre-tax profit outside Kenya of Sh1.35 billion in the year ended December.