This archive report was first published on 12 September 2019.
Published on September 12, 2019, a report by Business Daily Africa indicated that Equity Bank is expected to spend Sh. 17.6 billion to acquire Banque Commerciale du Congo (BCDC), the second largest bank in the Democratic Republic of Congo.
According to Standard Investment Bank (SIB), the estimated cost is based on BCDC's book value at the end of 2018 and the price Equity paid to settle the 2015 deal when acquiring ProCredit Bank, another DRC bank.
‘We basically estimated the net assets as at 2018 and then used the two-times multiple (2x) that they bought ProCredit at. Mostly likely, BCDC will be higher than the 2x multiple and that is why we are projecting a minimum of $170m,’ said SIB senior associate research analyst Martin Kirimi.
BCDC, with 29 branches in DRC, had net assets of Sh7.5 billion at the end of 2017, growing at an average of 10 per cent annually. The transaction will be settled via cash, unlike Pro Credit Bank acquisition that took place through a share swap.
Equity's subsidiary in DRC has experienced exponential growth, posting an average return on assets (RoE) of 15.2 per cent in 2018, up from 5.7 per cent in 2016. However, completion of the BCDC deal may shrink Equity's tier I capital adequacy ratio by about 300 basis points.
