ABC targets stock market with Crossfield buyout bid
| Written by Washington Gikunju | |
 Trading at NSE In the latest of a growing list of acquisitions of cash-strapped stockbrokers by banks, only a few formalities remain before the investors can acquire the broker that has been the subject of takeover speculation for almost three years. The ABC Bank chief executive, Mr Shamaz Savani, confirmed last week that the bank’s board of directors had approved the takeover deal, subject to financial due diligence that is under way and regulatory approvals. NIC Bank concluded its acquisition of Solid Investment Securities through its investment bank subsidiary NIC Capital early this year, while Chase Bank bought out collapsed stockbroker Town and Country mid this year and renamed it Genghis Capital. Mr Savani said ABC Bank’s investment management subsidiary, ABC Financial Services, was set to buy a 51 per cent stake in Crossfield, while the bank’s chairman and founder, Mr Ashraf Savani, would hold 20 per cent shares in Crossfield in his personal capacity. Two holding companies, Nanda Properties and Zena Investments, will respectively own 15 per cent and 14 per cent shares in the brokerage firm. Crossfield Securities was one of six stockbrokers issued with a three-month conditional licence by the CMA earlier this year due to what Mr Savani describes as negative cash positions highlighted through overdrawn accounts. The broker’s licence for this year was later renewed as were those of five others who had been given the conditional licence extensions. Analysts have supported the commercial banks’ foray into stockbroking, saying that the Central Bank (CBK) regulated institutions are likely to restore sanity into a sector that has lately lost credibility due to invasion by ‘rogue’ stockbrokers. Two stockbrokerage firms, Francis Thuo and Partners, and Nyaga Stockbrokers have gone under within a space of one year, sinking with them an estimated Sh1.1 billion of investors’ money at the Nairobi Stock Exchange. The CMA has acknowledged that both firms were involved in unauthorized selling of investors’ shares. The consortium of investors and their lawyers have been working out the finer details of the deal for the last one month culminating in the signing of a preliminary memorandum of understanding last Friday. ABC has commissioned three of its former staffers to conduct due diligence on the brokerage firm, a process that Mr Savani says is now in its latter stages. The former Crossfield chief executive, Mr Krishna Kumar, has been replaced by Mr Fred Maina, a former long serving head of operations at ABC Bank. Mr Maina also has a shareholding interest through one of the two holding companies, together with other ABC Bank members in their personal capacities. Mr Savani said preliminary audit shows that Crossfield was slipping deeper into the loss-making territory and is currently in urgent need of capital injection. The ABC Bank CEO, however, declined to disclose financial details of the transaction, saying a reliable figure could only be established after conclusion of the ongoing audit of the broker’s books. A member of the investment consortium, who did not want to be quoted, had earlier hinted that Mr Kumar, the former CEO, had signalled an asking price of Sh171 million in the early stages of the negotiations. The final purchase price of the firm has, however, remained a sticking point in the takeover talks owing to an unexpectedly long list of liabilities that Crossfield is said to have had. A group of external auditors have also been called in to verify an estimated Sh100 million outstanding claims bill against the firm. Crossfield is ranked among the smallest stockbrokers at the Nairobi Stock Exchange (NSE).  Mr Shamaz Savani Equity turnover statistics from the NSE show that Crossfield was among the bottom three firms at the bourse with a turnover of Sh754 million in the six months to June this year, accounting for only 0.66 per cent of total turnover of Sh113.8 billion in the same period. For close to two years, Crossfield has recorded a negligible growth in its clientele base, and has mostly relied on customers channelled through the firm by Tsavo Securities, a stocks agent that has no direct access to the NSE trading platform. Tsavo Securities managing director Fred Mweni has previously laid ownership claims on 51 per cent of Crossfield, saying he had placed a lien on the stock. However, ABC distanced itself from assertions by Mr Mweni that the two could be acting in concert. A section of the stockbrokers are also understood to be uncomfortable with the Sh171 million sale price, a figure that is below the NSE’s current valuation of a stockbrokerage seat at Sh251 million. The investor said that NSE and CMA are keen on preserving the minimum valuation of a stockbrokerage seat with a view of selling more seats to compensate Nyaga Stockbrokers clients who lost their money after the firm collapsed in March this year. A similar initiative was applied last year when collapsed stockbroker Francis Thuo and Partners’ seat was sold off to Renaissance Capital for Sh251 million and the money used to compensate investors. With investor claims from Nyaga estimated to have hit Sh1 billion, market regulators are said to be facing a headache on possible bail out options if only to safeguard investors’ confidence in the capital markets. Association of Kenya Stockbrokers (AKS) chairman, Jos Konzolo, however said stockbrokers could not oppose a private treaty between a willing buyer and seller. He added that the valuation of seats at the NSE depended on prevailing circumstances at the time of valuation. NIC Capital paid an estimated Sh150 million for a 58 per cent stake in Solid Investments while the Chase Bank purchase price for Genghis Capital has never been made public. The CMA confirmed that it had received notification that Crossfield was in takeover talks with a group of investors. “We are aware that Crossfield is in takeover discussions with some parties,” said CMA corporate communications and market development manager Samuel Njoroge. CMA has given stockbrokers three years to raise their paid-up capital to Sh50 million from the current Sh5 million minimum requirement while investment banks are required to increase their minimum capital to Sh250 million from the current Sh30 million. If successful, the Crossfield deal could help ABC realize its ambition of setting up a financial services supermarket in line with ongoing convergence of financial service providers. Only last year, the bank secured a licence from CMA to offer investment management services. ABC has an asset base of Sh6.1 billion which makes it a mid-tier bank by local standards. The bank recorded double digit growth in the 2007 financial year, with its customer deposits going up by 24 per cent to Sh5 billion. Fees and commissions income went up by 56 per cent to Sh195 million over the previous financial year as the net interest income increased by 17 per cent to Sh410 million; driving its pre-tax profits by 32 per cent to Sh185 million. While the local trend is a general shift towards mass market banking, ABC has stuck to its tested formula of relationship banking, which basically entails attracting and retaining a cliché of loyal, high net worth clients. The bank specialises in corporate banking, business/SME banking, personal banking and institutional banking and has a geographical spread of nine branches in Nairobi, Mombasa, Kisumu, Eldoret, Nakuru and Meru. The corporate department has its own relationship managers, cash management specialists, trade finance experts and a treasury specialist. A stockbrokerage arm is expected to fit neatly with ABC’s ambition to become a one-stop shop for its conservative clientele who, as Mr Savani admits, are always willing to pay a premium for any value addition services offered. |
A
0 التعليقات:
إرسال تعليق