This archive report was first published on 2 January 2020.
On January 2, 2020, Equity Group and Atlas Mara announced that they would review the terms of their deal, which was initially set to see the Kenyan lender acquire four banks in Rwanda, Zambia, Tanzania, and Mozambique.
The deal, which was announced in April 2019, would have seen Atlas Mara receive Equity shares valued at Sh13.6 billion, representing a 6.72 percent stake in the Kenyan lender.
However, the parties have since announced that they had not signed a binding agreement, citing undisclosed reasons. They added that their continued negotiations would likely result in a change of the deal terms.
According to Atlas Mara, while there is no assurance that the potential transaction will be concluded on the terms previously announced, the parties continue to be engaged in discussions.
The pressure to renegotiate the deal is likely the outcome of a divergence of fortunes of Equity and the four banks it is eyeing. Equity's prospects have brightened with the recent removal of lending rate controls, with its share price gaining 32.5 percent since the deal was announced.
On the other hand, the Atlas Mara banks are making losses in aggregate, with a return on equity (RoE) of approximately two percent. This has led to a reevaluation of the deal terms, with the parties considering a reduction in the value of the four subsidiaries by Sh13 billion to reflect their weaker earnings.
