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Co-Op Bank Extends Kikuyuism To Newly Acquired Kingdom Bank, Deal Marred With Rows

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After acquiring controlling stakes, Cooperative Bank of Kenya renamed Jamii Bora Bank to Kingdom Bank Limited.

The changes come after Co-op Bank acquired a 90 per cent stake in the small lender by pumping in Sh1 billion.

Kingdom will now be trading as a subsidiary of Co-op Bank, with its brand also donning the green colours that are synonymous with the Nairobi Securities Exchange – listed lender.

Keeping it with the names, many have been puzzled with the choice of the Kingdom choice for a name. Perhaps it could be the CEO who influence the naming.

Dr. Gideon Muriuki Co-Op Bank CEO is a staunch Christian, he’s influenced most Co-op operations to align with Christianity. When the bank bought a controlling stake at Bob Mathews Stock Brokers Limited, he renamed it Kingdom Securities. Now he’s taking the same strategy to Jamii Bora.

The Co-op Bank CEO is the top individual investor in CIC Group. He upped his shares this year by an additional 8.6 million shares. This pushed his shares at the insurer jump from 4.7 percent in 2016 to 5.04 percent in December 2017.

His stellar performance at the apex of the bank deserves a good pay cheque. The banker reportedly earns kes 370,000,000 per year.

Still staying with the CEO, there has been silent complaints in the bank’s corridor over nepotism, tribalism and generally unfairness in the composition of the senior management.

According to a complaint recently laid by a lobby group to the bank, nearly 90% of Co-Op bank top senior management positions are currently occupied by one tribe; Kikuyu. The complaint shoots at the CEO whom himself is from the same community of being tribal and only prioritizing his tribesmen for the senior positions leaving others frustrated with the difficulty of rising up the rank.

It didn’t come as a shock to those in the know of Kariuki and his taste that when Co-Op acquired Jamii Bora, he appointed Anthony Mburu another Kikuyu as the Kingdom Bank’s CEO.

Anthony Mburu.

Mr Mburu has been the director for credit management at Co-op Bank. He takes over from Mr Tim Kabiru who has been heading Jamii Bora.

The changes come after Co-op Bank acquired a 90 per cent stake in the small lender by pumping in Sh1 billion.

Kingdom will now trade as a subsidiary of Co-op Bank, with its brand also donning the green colours that are synonymous with the Nairobi Securities Exchange – listed lender.

Co-Op Bank restructured the management board and things remained more of the same at the top.

The board will be chaired by Margaret Karangatha with Co-op Bank managing director Gideon Muriuki being a member both again from the Kikuyu tribe.

Corporates given the fact that they’re not open to public scrutiny, have been taking advantage to promote nepotism and tribalism in appointments. It doesn’t make sense for a company to have 90% of senior positions occupied by people from same tribe at a time when the country is fighting the poisonings of tribalism. A recent study of public service also showed Kikuyus as the dominants in the top senior positions.

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Ethnic composition.

Acquisition of Jamii Bora didn’t miss its share of drama, there was a row with shareholders who felt shortchanged and bulldozed into submission. It exposed rifts among the existing shareholders of the small, capital-starved bank.

It emerged that four institutional investors in Jamii Bora, owning a combined stake of about 45 percent, were not privy to the lender’s financial health or the details of the proposed transaction.

The investors — Shorecap II, private equity firm Catalyst Principal Partners, Cornerstone Enterprises and Nordic Microcap Investment — wrote to Jamii Bora’s chief executive, Timothy Kabiru, on June 24 seeking information about the company and specific terms of the deal with Co-op Bank.

Mr Kabiru responded to the shareholders on June 30 saying that Jamii Bora was not obliged to provide most of the information requested.

He added that other details, such as the financial position of the company that has not been made public for two years, were only to be provided to shareholders after writing a formal request to his office.

It also emerged in the row that the bank had not held an annual general meeting for at least two years, a period in which the four institutional investors were in the dark with regard to the company’s finances and strategy.

It also showed that the transaction, in which Co-op Bank paid Sh1 billion for new shares, was progressing without a definitive agreement on all the terms.

The new agreement means that existing shareholders will not take out any cash in the deal with Co-op Bank.

All existing shareholders of Jamii Bora will be squeezed into a 10 percent stake, making them passive investors as Co-op Bank takes control of the board and management.

The investors had previously eyed a combined Sh1.4 billion payday when they tried to sell the bank to former CBA Group in January 2019.

Jamii Bora’s affairs showed restriction of shareholder rights, including access to the company’s financial statements, the terms of the proposed transaction and a business plan supporting the buyout by Co-op Bank.

Public companies typically issue circulars to shareholders detailing the terms and nature of mergers, acquisitions and major business reorganisations, especially post transaction.

The four institutional investors asked the CEO to provide them with a copy of detailed offer terms from Co-op Bank.

They sought to know Co-op Bank’s formal promise on its rescue for the loss-making lender, level of compensation if the deal collapses technically known as break fees, whether the board of Jamii Bora had approved the offer document, and whether shareholders will be entitled to receive and approve the final definitive transaction documents.

Mr Kabiru the CEO responded that the four had no rights over the shares being bought by Co-op Bank, arguing theirs are new and not existing stock.

“Since the offer does not relate to the existing shareholders’ per se, the company is not obliged to share the terms of the offer or the transaction documents,” Mr Kabiru replied in the June 30 letter.

Mr Kabiru’s stance showed that the Jamii Bora deal was concluded with minimal involvement of its shareholders.

At the July 1 “General Meeting” held to consider the buyout, countable shareholders controlling a combined 73 percent stake voted to approve the transaction.

They also gave the board of directors authority to take all actions necessary to conclude the deal, including amending the terms of the deal with Co-op Bank.

The Jamii Bora shareholders had invested more than Sh2 billion in the bank and recouping their capital will take years even under the stewardship of Co-op Bank.

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