Jamii Bora Bank investors have unanimously accepted Co-operative Bank’s offer to acquire 90 per cent for Sh1 billion at the lender's Annual General Meeting held Wednesday.
This will be through the subscription of 224,153,154 new class of Ordinary Shares that would also see Co-op Bank appoint a board to run the business.
In a statement, Co-op Bank said the acquisition will strengthen both institutions leveraging on its well-established universal banking model as well as business transformation agenda riding on the bedrock of the 15 million-member co-operative movement.
Co-op Bank managing director Gideon Muriuki said Jamii Bora customers would find Co-op Bank a natural – and a better - home for their kind of banking needs as it serves related market segments who include SMEs and groups.
''With over 440,000 customers and 17 branches, Jamii Bora is a value-add to Co-op Bank, with minimal overlaps and large upside potential for exploration of deeper banking relationships,’’ Muriuki said.
He added that Jami Bora's takeover is consistent with the Co-op Bank growth strategy that seeks to build dominance in the bank’s ‘domain market’ – Kenya – as opposed to expansion outside Kenya’s borders.
The additional customer base is likely to push Co-op Bank's customer base to over nine million, behind NCBA, Equity Bank and KCB. It currently has 8.7 million subscribers.
NCBA is leading in customer subscription at 40 million, thanks to M-Shwari, a mobile money wallet partnership with Safaricom Plc. It is followed by Equity Bank with slightly above 15 million.
Co-op Bank has in the past indicated that upon acquisition, Jamii Bora may become the new platform for its specialised business lines such as youth and women banking, asset finance and leasing.
In March, the Central Bank of Kenya (CBK) welcomed the buyout, saying it will enhance the stability of the Kenyan banking sector.
The Jami Bora buyout is a sigh of relief to its investors who continues to incur losses due to the lender's poor cash liquidity on barren investments.
Jamii Bora invested Sh500 million in struggling Uchumi Supermarket, with another Sh412 million lent to Kenya Airways, which has been on a loss-making streak.
The tier three lender’s liquidity ratio stood at negative 11.1 per cent in March 2018, far short of the minimum statutory requirement of 20 per cent.
In January, Commercial Bank of Africa's (CBA) dropped its offer of Sh1.4 billion to Jamii Bora and instead opted to with NIC Bank to form NCBA Group.
This becomes the latest acquisition in the banking sector that has seen consolidation take shape. Other such deals have been between KCB Bank and National Bank.
The acquisition which is now awaiting regulatory approval from CBK, Capital Market Authority (CMA) and the Competition Authority of Kenya (CAK) will see Co-op Bank inch closer in regaining its position as the third-largest bank in Kenya in terms of asset value.
It was dislodged by the NIC, CBA merged entity, NCBA whose asset value sits at Sh509.6 billion compared to Co-op Bank's Sh470 billion.
Jamii Bora's Sh12.8 billion total worthiness will push Co-op Bank's value to Sh482.8 billion.
KCB is the biggest bank in Kenya after its total assets rose by 26 per cent to Sh899 billion from Sh714 billion after acquiring the National Bank of Kenya (NBK). It is followed by Equity Bank.