This archive report was first published on 8 August 2019.
On August 8, 2019, Parliament ordered the Treasury and NSSF to reject KCB's proposed buyout of the cash-strapped National Bank of Kenya (NBK), throwing into confusion the already underway multi-billion-shilling transaction.
The National Assembly's Departmental Committee on Finance and National Planning tabled a report in the House, stating that the takeover deal undervalues NBK and is not in the best interest of workers, taxpayers, NBK staff, and minority shareholders.
The committee chair, Joseph Limo, recommended that the principal shareholders (National Treasury and National Social Security Fund (NSSF)) should not accept the offer by KCB on the acquisition of 100 percent shares of NBK.
NSSF holds 48.05 percent shares of NBK, while the Treasury controls 22.5 percent, giving them 70.5 percent total ownership. The conversion of NBK preference shares into ordinary stock has seen the Treasury and NSSF control an even bigger effective shareholding of 93.23 percent, taking them above the minimum legal threshold required for a takeover transaction to be declared successful.
MPs have recommended that the government seeks cash to recapitalize NBK, a feat that the Treasury has failed to achieve in the past decade, pushing the bank to the brink of collapse.
The committee has also proposed that the Treasury seeks alternative ways of funding NBK to ensure that it is compliant with the Banking Act capital ratios so as to continue lending and taking in more deposits.
"The National Bank should pursue the Rights Issue in order to raise enough capital," states the report.
The Capital Markets Authority (CMA) stated that the transaction is entirely governed by the Takeover and Mergers Regulations, 2002, indicating that shareholders of NBK have the final say on the matter.
