Banking group I&M Holdings will pay USD 33.6m (Shs112 billion) to acquire a 90 per cent stake in Uganda’s Orient Bank, according to disclosures in a circular to shareholders.
The shares will be bought from Hemlata Karia, Jay Karia, Morka Holdings Limited, Zhong Shuang Quan, Cornerstone M8 Limited and the bank’s founder Ketan Morjaria.
Dr Morjaria, who currently holds a 7.91 percent stake, will only sell part of his shares and will retain a 5.5 percent equity in what will become I&M’s subsidiary.
Mr Alemayehu Fisseha is not selling his holdings and will also retain a 4.5 percent interest in the bank.
“I&M is required to effect payment of the purchase consideration for Orient’s shares by way of an amount in $33.6 million (Sh112 billion),” the Nairobi Securities Exchange-listed lender said in the circular.
I&M added that the purchase price is subject to further adjustments on account of several factors including exchange rate fluctuations and the amounts raised from the sale of the Ugandan bank’s property in Kampala (Orient Plaza).
The deal will add to I&M’s regional banking operations comprising Kenya, Rwanda, Tanzania and Mauritius.
The lender had been eyeing the Ugandan market as early as 2014 in pursuit of growth and regional diversification strategy that is also seen among rivals like KCB Group, Equity Group and DTB Group.
“The combined group will be better able to serve the needs of regional and global customers, and in turn promote regional trade flows,” I&M said of the Orient Bank buyout.
“In its regional expansion strategy, I&M Bank Group seeks to follow its customers in order to support their business and banking needs. This will be fulfilled by its presence in Uganda.”
Orient Bank reported a net loss equivalent to Sh30.9 million in the year ended December 2019 when its shareholder funds or book value stood at Sh3.3 billion.
Dr Morjaria is also a founder and significant shareholder in Kenya’s Credit Bank that recently unsuccessfully tried to raise Sh1 billion of new capital from private equity firm Oikocredit International.
He has a 9.8 percent stake in Credit Bank.
I&M currently runs a corporate finance advisory business, I&M Burbidge Capital, in Uganda and acquisition of the bank will expand its operations in that market.
I&M’s move underlines the growing quest among local lenders for a bigger presence in the regional market where uptake of financial services is lower than Kenya.
This signals significant growth opportunities in countries such as Uganda, Rwanda and Burundi that have fewer banks compared to Kenya’s 38 lenders. There are 24 banks operating in Uganda, including subsidiaries of KCB , Equity , and DTB .