Fountain Enterprise Programme (FEP) Group has so far sold nearly two thirds of its shares in Nyachae-backed Credit Bank after the regulator rejected its bid to take control of the small lender.
The loss-making investment group, partly backed by the Kenyan diaspora, yesterday revealed it has so far offloaded 412,124 shares or 61.5 per cent of its holding in the tier III bank to members at a price of Sh162 a share.
This means that it has recouped Sh66.7 million from the ongoing divestiture from the bank controlled by the family of Moi-era powerful politician Simeon Nyachae, who is also chairman of the bank.
FEP last year invested Sh107 million in return for a five per cent stake (669,737 shares) in Credit Bank and was fundraising with an eye on ultimately controlling 75 per cent of the lender, before the Central Bank of Kenya rejected the bid.
“We are selling at the same price we acquired. We’ve been selling to our investors,” said Maurice Korir, who took over as chief executive at FEP in October from founding chief executive John Kithaka.
“We want to get out as soon as possible. The proceeds will fund other business units,” he told the Business Daily in an interview.
Credit Bank had a net asset value of Sh100.14 per share as at December 2014, meaning FEP and its members bought the shares at a premium of up to 80 per cent.
Credit Bank had net assets (total shareholders’ funds) of Sh2.37 billion as at September 2016, valuing it at Sh8.3 billion going by Atlas Mara’s criteria, which gives a 3.5 multiple on book value for those eying to acquire Kenyan banks.
The formula, however, was prescribed before change of the regulatory regime.
Mr Korir said the chama has been wooing its members to take up the shares, whose price is seen as a discount compared to the Sh180 being offered by Credit Bank to FEP members via an ongoing private placement.
CBK last month declined FEP’s bid to take control of Credit Bank after raising queries on the chama’s share register and its financial muscle to adequately capitalise the small lender.
The banking sector regulator had raised similar ownership and capital concerns early this year in denying the investment group a licence to operate a deposit taking microfinance bank, despite a temporary approval.
CBK in mid-2014 issued a interim approval to FEP to set up Fountain Microfinance Bank, pending vetting to establish capital adequacy, ownership and suitability of directors to run a banking business.
In the red
FEP was in the red to the tune of Sh905.7 million as at December 2015, compared to a net loss of Sh1.4 billion a year earlier.
It has a membership of 70,273 investors, with a significant stock being Kenyans residing in the UK and US.
FEP’s footprint in the financial industry now reduces to 60 per cent holding in mobile money platform MobiKash and two wholly owned firms: Fountain Credit Services and Nobel Insurance Agency.
Credit Bank’s net profit for the nine months to September grew fivefold to Sh123.7 million, buoyed by interest income from loans and government securities. The bank has 16 outlets in Kenya.
Mr Korir said the results of FEP’s recently concluded rights issue will be released once approved by the board. Existing shareholders were offered three new shares priced at Sh18 apiece for every eight stocks held, in a cash call expected to raise Sh2.6 billion.