By Our Reporter
Kampala: I&M Holdings PLC has issued a cautionary announcement advising its shareholders of a proposed transaction between the bank and Uganda’s Orient bank Limited, which may affect the value of its shares. In the proposed transaction, I&M plans to acquire 90% of the ownership of the Orient bank.
The Nairobi Securities Exchange-listed firm had been eyeing the Ugandan market as early as 2014 in pursuit of growth and regional diversification strategy that is also seen among rivals like KCB Group, Equity Group and DTB Group .
“Shareholders of I&M Holdings are advised that the company has on July 17, 2020 entered into an agreement with the shareholders of Orient Bank Limited for the sale and purchase of shares comprising 90 percent of the issued share capital of Orient Bank Limited,” I&M said in a notice.
“Further details of the transaction will be made available to the shareholders of the company in due course.”
Sources familiar with the matter told TheSpy Uganda that I&M aims to complete the transaction later this year and is expected to pay more than Sh2 billion for the controlling stake.
The deal is subject to regulatory approval from both Kenya and Uganda central banks and the Capital Markets Authority.
Orient Bank reported a net loss equivalent to Sh30.6 million in the year ended December 2019 when its shareholder funds or book value stood at Sh3.3 billion.
Orient Bank’s major shareholders include its vice chairman and founder Ketan Morjaria.
I&M currently runs a corporate finance advisory business, I&M Burbidge Capital, in Uganda and acquisition of the bank will expand its operations in that market.
I&M’s move underlines the growing quest among local lenders for a bigger presence in the regional market where uptake of financial services is lower than Kenya.
This signal significant growth opportunities in the countries such as Uganda, Rwanda and Burundi that have fewer banks compared to Kenya’s 39 lenders. There are 24 banks operating in Uganda, including subsidiaries of KCB, Equity, and DTB.
Through its history, the Orient bank has gone through several ownerships by different entities and individuals. The last acquisition was by the London-headquartered private equity fund 8 Miles, founded by musician Bob Geldof, who acquired a 42 per cent stake in Orient Bank (U) Ltd in 2015. The founders of the bank, led by Ketan Morjaria, hold 49 per cent in the bank.
The remaining shareholding is by individuals Alemayehu Fisseha, the owner of Prime General Supplies, and the Ugandan-based Chinese manufacturer and property developer, Zhong Shuang Quan – each with 4.5 per cent.
In 2019, the bank struggled to make money, turning in a loss of 1 billion Uganda Shillings from a 5.6 billion Shillings profit registered in 2018. Its assets grew to 814 billion Shillings in 2019 from 749 billion Shillings in 2018, according to published financial results.