NEWS WIRE: Kenya: Ecobank Closing Deal to Acquire 75% of East African Building Society (EABS Bank)

Original article available here.

NAIROBI, May 26 – The battle in the financial services sector is expected to reach fever pitch as one of Africa’s largest players prepares to make a grand entry into the country.

Ecobank, which has its headquarters in Lome, Togo, expects a deal to acquire a 75 per cent majority stake in mortgage lender East African Building Society to be concluded in a month.

“We have most of the regulatory approval from the Central Bank and the Ministry of Finance. Our hope is to start by the end of June,” said Mr Arnold Ekpe, the group chief executive officer of Ecobank. The bank is waiting for a gazette notice, legalising the transaction, to be published.

Boasting of an asset base of USD 6.5 billion, a footprint in a number of African countries, and listings on the Nigerian, Ghanian and the Bourse Régionale des Valeurs Mobilieres, a regional stock exchange serving eight West African countries, the bank is confident of making its way up the ladder in the local market.

The cost of acquisition is estimated at KES 1.2 billion, three quarter of EABS’ shareholders funds at the end of the 2007 financial year. More cash is expected to be pumped into EABS to increase its capital.

“Obviously, EABS is not among the top three banks, but we will work to get our way to the top,” said Mr Ekpe. In other markets, the bank has positioned itself among the top three through organic growth and acquisitions. Kenya is set to be the hub for Ecobank’s East African operations, which includes a Rwandan subsidiary, Bank of Commerce, Development and Industry (BCDI). The bank acquired a 90 percent stake last year.

It has plans of acquiring another bank in Burundi. In Uganda and Tanzania, failure to find a suitable partner has forced the bank to seek new licences to start business from scratch.

Spill over

The expansion is in line with a plan of making it easy for customers to transact business across Africa. Its presence in 22 African countries, with 490 branches, is expected to play into the favour of Kenyan consumers who, according to the bank, will be able to access services via automated teller machines in 17 of the countries.

In Kenya, the bank will be looking at embarking on a systems roll out and in the process also doubling the number of EABS branches, currently 10, in a year. It hopes to carry this out using local expertise, by retaining some of the current EABS staff.

The bank will target both corporate and retail segments, focusing on areas such as microfinance, mortgage and investment banking, Mr Ekpe said. Competition is expected to spill over to the investment banking sector where Ecobank is sizing various stockbrokers before making an approach.

A proposal by the Capital Markets Authority to capital requirements for investment banks and stockbrokers to KES 250 million and KES 50 million respectively has opened the door for acquisitions.

Mr Mike Ashong, group head investment banking, says they have approached two local stockbrokers in an attempt to make a foray into the market, but he was unwilling to discuss the particulars.

“We are still in negotiations and cannot reveal the exact details,” he said. Nyaga Stockbrokers is understood to have been one of the firms in its radar, but has since been dropped as the broker is under statutory management.

The expansion will be financed through a share sale targeting to raise USD 2.5 billion. The process is before the management of the three stock exchanges where it is listed for approval. Mr. Ashong said that they plan on having the offer in mid -June this year.

Ecobank has an eye on listing its share at the Nairobi Stock Exchange once it has settled down in the country.

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