EQUITY BANK NEW ACQUISITION

EQUITY BANK’S PHENOMENAL GROWTH MOMENTUM CONTINUES, WITH THE ANNOUNCEMENT THAT THE FIVE – YEAR OLD COMMERCIAL BANK IS TO ACQUIRE A 100 PERCENT STAKE IN UGANDA MICROFINANCE LIMITED. THE ARMS – LENTH TRANSACTION INVOLVES 1.7 BILLION KENYA SHILLINGS AND IS TO BE FINANCED BY WAY OF AN ALLOTMENT OF 11.3 MILLION NEW EQUITY BANK SHARES TO THE UGANDA ENTITY’S CURRENT OWNERS. THE DEAL WILL RESULT IN THE DILUTION OF EQUITY BANK SHARES BY ABOUT 3 PERCENT.

THE OUTRIGHT PURCHASE OF UGANDA MICROFINANCE, WHICH HAS 28 BRANCHES AND 14 CONTACT OFFICES ACROSS UGANDA MEANS THAT EQUITY ACQUIRES A PROFITABLE GOING CONCERN AND AVOIDS THE HASSLE OF SETTING UP ITS OWN PRESENCE IN THAT COUNTRY.

ANNOUNCING THE DEAL, EQUITY BANK CEO JAMES MWANGI BRUSHED ASIDE CONCERNS OVER THE BANKS RAPID GROWTH, ATTRIBUTING IT TO UNMET DEMAND IN THE MARKET. MWANGI SAID THE BANK HAD A LIQUITY POSITION OF 77 PERCENT AS AT DECEMBER 2007, AND WAS THEREFORE AWASH WITH CASH AT THE MOMENT, FOLLOWING THE INJECTION OF NEW CAPITAL BY THE HELIOS FUND.

IT IS EXPECTED THAT THE BANK WILL REPLICATE ITS KENYAN MODEL IN UGANDA WHERE ITS NEW SUBSIDIARY WILL BE POISED TO TAKE ADVANTAGE OF A THRIVING BUSINESS RELATIONSHIP BETWEEN THE TWO COUNTRIES. 56 PERCENT OF UGANDAN IMPORTS ARE EITHER FROM, OR PASSES THROUGH KENYA. ALSO AT STAKE IS AN INCREASINGLY IMPORTANT SCHOOL FEES TRANSFER DUE TO THE LARGE NUMBER OF KENYANS SCHOOLING IN UGANDA. NOW ALL YOU HAVE TO DO IS DEPOSIT THE MONEY IN UA EQUITY ACCOUNT AND IT IS ACCESSIBLE ACROSS THE BORDER IN UGANDA.

THE DEAL, CONCLUDED IN A RECORD THREE WEEKS MEANS THAT EQUITY WILL START ROLLING OUT ITS BRANDING AND SERVIES BY JULY THIS YEAR. THE DEAL IS SUBJECT TO REGULATORY APPROVAL, BESIDES HAVING TO PASS THE SCRUTINY OF 7,000 SHAREHOLDERS AT AN EXTRAORDINARY GENERAL MEETING TO BE CALLED SOME TIME SOON.

PREVIOUS OWNERS ---- UGANDANS AND THE AUREOUS FUND.