Centum Acquisition of a Controlling Stake in K-Rep Bank

In November 2014, Centum, the East African investment firm, announced the acquisition of a controlling stake in Kenyan bank K-REP Bank Limited from several existing shareholders. Fred Murimi, Corporate Affairs Director, Centum Investment Company Limited, told us more about the deal – and how it will help Centum achieve its goal of becoming Africa’s foremost investment channel

Centum is a listed investment firm established in 1969 and is listed on the Nairobi and Uganda securities exchanges. It has over US$470m in investment in financial services, FMCG, power and real estate.

With a vision is to be Africa’s foremost investment channel, Centum’s key objective is to consistently generate market beating returns by building extraordinary enterprises throughout Africa.

In November 2014, Centum announced the acquisition of a 66% stake in K-REP Bank Limited from several existing shareholders, including African Development Bank, IFC, Triodos Doen, FMO and Shorecap International to bring its total shareholding in K-REP to 67.54%.

“Centum exercised its preemptive right, together with other non-selling shareholders, to obtain a controlling stake in the bank,” says Fred Murimi, Corporate Affairs Director, Centum Investment Company Limited.

K-REP was licensed as a commercial bank in 1999 and has registered steady growth over the years. The bank is a medium-sized microfinance bank serving the urban and rural poor in Kenya, as well as financing their small-to-medium business enterprises. As at 30 June 2014, K-REP’s total assets were valued at KES13,683m (US$149.7m).

Centum says the deal is in line with its objective of expanding its presence in the financial services sector. “Centum intends to drive increased investment focus in eight key sectors, one of which is financial services, as it seeks to become Africa’s foremost investment channel,” says Murimi.

A well-thought-out plan of action is vital to successfully completing a deal – and ensuring it continues to be successful in the long term, says Murimi. “The important elements are alignment among all stakeholders and a clear vision and strategy for the investment by the new investor.”

Like any deal, there were, of course, challenges, says Murimi. “The major challenge was negotiating with five different investors on a share purchase agreement. This was overcome through ensuring a joint negotiation all through resulting in buy in from the different sellers at any one time.

“Time was also a constraint since the transaction required a number of regulatory approvals and the long stop date from signing the SPA was short. This was overcome by continuous engagement with the regulators, who also worked efficiently in the period.”

The current business environment in Kenya is very encouraging, says Murimi – and this was important in helping bring the deal to a successful conclusion. “It’s positive and optimistic looking into the future, with improved government investment in infrastructure and a concerted effort by the government to support businesses.

“The climate was conducive to completing the deal,” he says.

It’s a deal which will be beneficial to both parties, says Murimi. “The deal will allow K-REP to access a wider capital base and increase its presence in the sector, while allowing Centum to increase its financial services portfolio.”

Looking to the future, Murimi says Centum intends to grow K-REP into a full-service Tier II bank in Kenya within five years.