Equity Bank has dropped bid to acquire businesses owned by Atlas Mara which would have seen the lender expand its operations in Rwanda, Tanzania, Zambia, and Mozambique.
According to the bank, the decision was informed by the uncertainty relating to the proposed acquisition due to the Global Covid-19 pandemic.
“After careful consideration, EGH and ATMA have mutually agreed to discontinue discussions on the transaction for the foreseeable future,” said Dr James Mwangi, Managing Director of Equity Group.
“We have deployed a defensive and offensive mechanism through loan accommodations and rescheduling or restructuring of up to 25 per cent of the total loan book for periods of up to 36 months. This will enable our customers to go through the prevailing turbulence, while at the same time preserving cash to shore up the financial revival and growth of their businesses post the COVID-19 crisis.”
Read: Equity Bank Founder Peter Munga Accused Of Swindling Business Partner Ksh150 Million
Last year, the Board of Directors for Equity Group agreed to the entry into a binding term sheet through a share swap to exchange certain banking assets of Atlas Mara in four countries for shares in Equity Group.
However, the time for negotiation lapsed and Equity was forced to extend the time in January, before Covid-19 struck in March.
If the deal sailed through, Equity Bank would have acquired 62 per cent of the share capital of Banque Populaire du Rwanda, 100 per cent of the share capital of African Banking Corporation Zambia, 100 per cent of the share capital of African Banking Corporation Tanzania and 100 per cent of the share capital of African Banking Corporation Mozambique.
Equity, in tha recent times has announced plans to cut spending, first withholding proposed dividend declaration and payment in what they said is market uncertainty.
In a statement, the lender said that the withdrawal is as a result of assessment of risk, post balance sheet date of December 31, 2019 and of the Group’s approach to prudent risk mitigation and management amidst the Covid-19 pandemic.
“COVID-19 global health pandemic has led to a great lockdown which has induced a complex and multi-faceted global crisis of health, economic, and social challenges of an unprecedented magnitude. The pandemic’s effects have created a significant drop in the global GDP, and a substantial loss of employment leading to an economic recession which economists are projecting will evolve into a global depression worse than the Great Depression of the 1930’s,” the Bank stated.
Read: Equity Bank Sends Home 60 Employees After Donating Billions To COVID-19 Fund
The bank recorded a 14 percent growth in profit after tax growth to Ksh22.6 billion for the year ended December 31, 2019.
With a 14 percent growth in earnings per share of Ksh5.93 up from Ksh5.22, the bank’s Board of Directors had proposed a 25 percent enhanced dividend payout of Ksh2.50 up from Ksh2.00 per share.
The shareholders were poised to receive Ksh9.5 billion, before the board changed its mind
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