Centum Investments Company Plc will be selling its 83.4 percent shares in Sidian Bank at a cost of 4.3 billion shillings. This is after the investment giant entered into a binding agreement with Access Bank from Nigeria.
“The transaction is subject to customary adjustments agreed by the parties. It is expected that in due course, Sidian will be merged with Access Bank’s subsidiary in Kenya to create a stronger banking institution positioned to serve the Kenyan market,” said Centum in a statement.
Centum has been instrumental in sustaining the growth of Sidian Bank making it one of the leading SME and trade finance institutions in Kenya. Given that SMEs employ about 86 percent of Kenya’s population and contribute about 45.5 percent o Kenya’s GDP, Sidian has played a major role in walking entrepreneurs down the path of success through thick and thin.
The exit of Centum from Sidian Bank is in-line with Centum’s strategy to exit non-dividend paying assets at higher valuations than book value to pay shareholders higher dividends and deploy the capital into more cash-generative investments and debt payments.
“Currently, we have 7.4 billion shillings cash excluding the expected amount from this transaction. Post this transaction we should be seating on about 10.4 billion shillings with 1.5 billion shillings of debt,” added Centum in a statement on the transaction.
With the sale of the stake, Centum Net Gain will hit 59 percent greater than the book value and the company hopes to deploy cash received in cash-generative investments that will see continue reclaiming its top position within and without the real estate sector.
For years, Sidian Bank has been a leading SME and trade finance bank that has grown its Balance Sheet by over 70 percent from 19 billion shillings in December 2012 to 30 billion shillings as of March 2022 after Centum’s investment.
The robustness and resilience of Sidian’s Balance Sheet have enabled it to deliver high-impact services to its clientele. Additionally, Sidian’s profitability has improved since 2019, with a record profit of over 486 million shillings generated in 2021 while the NPL Ratio improved from 20.6 percent in 2017 to 11.7 percent as of March 2022, comparing favorably to Kenya’s current national average of 14 percent.
“This transaction stands as one of the largest private equity transactions in East Africa and reflects a strong commitment by Access Bank to the future of the Kenyan economy. It advances Centum’s vision to be Africa’s foremost investment channel and bolsters our track record of attracting foreign investors into Kenya and the region to invest in extraordinary enterprises.
The proceeds from the sale will enable Centum to continue investing across strategic sectors in Kenya and the East African region. We are particularly pleased to be exiting Sidian at a price which represents a 59 percent premium to the book value and confirms the deep discount embedded in the valuation of the assets in our book,” said Centum’s CEO, Dr. James Mworia.
Sidian has a strong and experienced management team, who have driven the business to meet ambitious strategic targets whilst actively minimizing risks and winning several awards, the most recent of which include Best Bank in Customer Satisfaction Tier III by Think Business Banking Awards 2021: Best Bank in Digital Banking 1st Runners Up, Best Bank in Internet Banking 2nd Runners Up and Best Bank in Mobile Banking 2nd Runners Up.
“The transaction builds on our earlier acquisition of former Transnational Bank Plc (now Access Bank Kenya) and underscores our drive to strengthen our presence in Kenya which is a key African market that fits into our core strategic focus for geographic earnings, growth, and diversification.
Through this transaction and the subsequent merger with Access Bank Kenya, we will be well placed to promote regional trade finance and other cross-border banking services, by leveraging our presence in key global trade corridors and the broader East African Community and COMESA regions.
The proposed combination with Access Bank Kenya would undoubtedly catapult us to a strong Tier 2 bank contender in the Kenyan market with enhanced capacity to play a more impactful role in the growth of the Kenyan economy and deliver increased profitability to our shareholders,” said CEO of Access Bank, Mr. Roosevelt Ogbonna.
Currently, Centum investment has an asset size of approximately 48 billion shillings as of March 2022. The company has over 36,000 shareholders with investments in key sectors of the economy like real estate, financial services, education, FMCG, Health care, agriculture, and power. The proceeds made from this transaction will be used to offset the outstanding debt of Ksh 3 billion while the rest will be deployed to more cash-generative investments.