Diamond Trust Bank is set to acquire Habib Bank Ltd for Sh1.8 billion. It will use it own shares to compensate owners of the small lender.
Habib investors, who already own 11.97 per cent of DTB, have been offered a 4.75 per cent interest in the Nairobi Securities Exchange-listed firm as consideration for the buyout.
They will be allotted 13.2 million shares in DTB at a price of Sh137.39, representing a 33.3 per cent premium on the stock’s closing price of Sh103 on Tuesday.
Acquisition of Habib, expected to be completed in July, marks the latest buyout of a small bank in the local market after the sale of Giro Commercial Bank to I&M Holdings and Fidelity Bank to Mauritius’ SBM Holdings.
Small lenders have been the hardest hit by the capping of interest rates, which has thinned their lending margins while they continue to incur relatively higher cost of funds.
“Under the transaction, the entire consideration is intended, subject to all requisite regulatory approvals, to be satisfied by the issuance of 13,281,105 ordinary new shares in DTB at a price of Sh137.39 per share to HBL who is already a shareholder in DTB,” the NSE-listed firm said in a statement.
“As a consequence, upon completion of the transaction, all the existing shareholders of DTB will be diluted by 4.75 per cent.”
Purchase of bonds
DTB on Tuesday announced a 17 per cent net profit growth to Sh7.7 billion in the year ended December, driven by increased lending and purchase of bonds. The lender said the acquisition would come as a huge boost to its market operations.
“The satisfactory completion of the transaction will, among others, increase DTB’s market share, enhance its operational leverage and diversify its presence through correspondent relationships in additional geographical areas that include some of the most promising growth frontier markets in Asia within the markets where HBL has operations,” it said in a cautionary note.
DTB’s market share grew to 6.1 per cent to rank sixth last year surpassing the five per cent mark used by the Central Bank of Kenya (CBK) to classify banks as large industry players.