Mwalimu sacco bid to buy major stake in Equatorial bank hits snag
What you need to know:
- The ministry has already formed a team to look into the deal that has so far received approval from the Competitions Authority of Kenya as well as the Central Bank.
- It has emerged that Mwalimu sacco failed to furnish the ministry with a due diligence report on the deal demanded in September last year as a condition for approving the transaction.
- The latest development was kicked off by a protest letter from the Cooperative Alliance of Kenya to the Industrialisation ministry, claiming that the transaction had abused various processes.
Mwalimu sacco’s acquisition of a 51 per cent stake in Equatorial Commercial Bank (ECB) has been halted yet again, as the government investigates claims of abuse of due procedure.
The Industrialisation and Enterprise Development ministry, which is in charge of cooperative societies, has stopped the Sh1.6 billion deal in the wake of fresh queries on its financial viability.
The ministry accuses the sacco’s officials of failing to respond to its queries regarding viability of the investment to members before any financial commitment.
“We have told them to hold it until we get a clear explanation on the issues we had raised earlier… it should take at least two weeks to complete the probe,” Principal Secretary Wilson Songa told the Nation on Tuesday.
DUE PROCESS
The ministry has already formed a team to look into the deal that has so far received approval from the Competitions Authority of Kenya as well as the Central Bank.
“The team formed by Commissioner of Co-operatives (Patrick Musyimi) will report to us on whether or not all due process was followed in the acquisition,” said Mr Songa.
It has emerged that Mwalimu sacco failed to furnish the ministry with a due diligence report on the deal demanded in September last year as a condition for approving the transaction.
“You are required to furnish this office with the due diligence and feasibility study report on the said Equatorial Commercial Bank,” the ministry said in the letter.
“In addition, you should not make any financial commitment on the investment before getting approval from this office and Sasra,” the letter dated September 25 added.
Mwalimu sacco, however, proceeded with the deal, sealed last Friday, upon getting approval from the Sacco Societies Regulatory Authority (Sasra).
PROTEST LETTER
“We have also signed off the shareholders’ agreement, making Mwalimu sacco the majority shareholder of ECB with a 51 per cent stake,” Mwalimu sacco chief executive Robert Shibutse said in a statement on Friday last week. Mr Shibutse is a former non-executive director at ECB.
The latest development was kicked off by a protest letter from the Cooperative Alliance of Kenya to the Industrialisation ministry, claiming that the transaction had abused various processes.
The CAK argued that Mwalimu sacco did not present the due diligence report on Equatorial Commercial Bank by Ernst and Young at its annual general meeting to ensure that members approved the deal from an informed point of view.
