Kenya’s competition watchdog has unconditionally approved the proposed acquisition of a 10.13% stake in I&M Group PLC, one of the country’s largest banks, by a new investor without any conditions attached.
The Competition Authority of Kenya (CAK) said in a detailed statement that the transaction between I&M Group and East Africa Growth Holding, an affiliate of pan-African private equity firm AfricInvest, is “unlikely to negatively impact competition in the market for commercial banking services, nor elicit negative public interest concerns.”
The deal will see East Africa Growth Holding acquire the 10.13% stake from British International Investment PLC, an existing shareholder in the Nairobi Securities Exchange-listed I&M Group. It will also give the acquirer certain governance rights including board representation.
“The proposed transaction involves the acquisition of 10.13% of the issued share capital of I&M Group PLC by East Africa Growth Holding from one of its existing shareholders — British International Investment PLC — with certain rights touching on appointment of directors to the Board, business plans, significant changes to senior management,” the CAK noted.
I&M Group operates commercial banks across five East African countries including the market-leading I&M Bank in Kenya, which is classified as a Tier 1 lender with a 5.15% market share based on the regulator’s weighted market size index as of December 2022.
“One criterion of assessing a merger’s impact on competition is the post-merger market share of the undertakings involved in the transaction. With regard to the proposed transaction, the market share of the merged entity will be 7.69%,” the CAK statement said, adding that this change is unlikely to substantially lessen competition given the presence of bigger banks.
“This change will not significantly alter the structure and concentration of the market for commercial banking services. Additionally, the merged entity will face competition from the other banks controlling over 90% of the market post-merger.”
The regulator highlighted that East Africa Growth Holding’s affiliate Prime Bank, a Tier 2 lender, and I&M Bank “will continue to operate independently across their respective markets after the implementation of the proposed transaction.”
Discussing public interest considerations, the CAK said “all the 1,414 employees of I&M Bank will be retained under the current employment terms” post-acquisition.
“Additionally, the proposed transaction is unlikely to affect the ability of SMEs to gain access to the market and neither will the transaction affect the ability of Kenyan undertakings to effectively compete in international markets,” the regulator stated while clearing the deal.
The transaction required CAK approval as the combined turnover of the parties exceeded KES 1 billion, meeting the threshold for a mandatory merger notification and full analysis under Kenyan competition laws.
This is the latest M&A deal in Kenya’s banking sector which has seen several acquisitions and consolidations in recent years as lenders bulk up resources and expand regionally amid increasing competition.
