Britam Holdings future has been cast into doubt amid splits with Equity Bank Group after the former sold its shares.
Britam has sold Sh12.2 billion worth of shares of Equity Group to the International Finance Corporation (IFC).
The deal, revealed through a regulatory notice by Equity Group Holdings (EGH), now gives the investment arm of the World Bank a 6.7 per cent share of the lender.
“EGH was notified that on December 24, 2021, Britam Holdings and Britam Life Assurance Company (Kenya) entered into a share purchase and sale agreement with International Finance Corporation (IFC) and IFC Financial Institutions Growth Fund LP whereby, subject to the approval of the Capital Markets Authority, IFC agreed to acquire by way of a private transaction, 164,521735 shares constituting an equity stake of approximately 4.36 per cent as at December 22, 2021,” said the notice.
“IFC FIG Fund agreed to acquire 88,588,626 shares (constituting an equity stake of approximately 4.36 per cent as at December 22, 2021) held by Britam and Britam Life in EGH.”
IFC already owns 10.37 per cent of Britam and the latest deal gives the investment unit a stronger hold on the country’s financial services sector.
It also puts the IFC among the top shareholders of Equity Group.
According to Equity’s annual report for the year ended 2020, the top shareholders include Arise BV founded by Rabobank, Norfund, NorFinance and FMO, which owns 452 million shares of the lender translating to 11.99 per cent stake valued at Sh21.9 billion.
Other top investors listed include Stanbic Nominees with 131.9 million shares valued at Sh6.4 billion, and the firm’s Managing Director James Mwangi whose 127.8 million shares give him a 3.3 per cent stake valued at Sh6.1 billion.
In a rival plan, Equity Group added yet another subsidiary to its stable after the Insurance Regulatory Authority (IRA) gave it the licence to operate a life assurance company.
Equity Life Assurance Kenya (Elak), which is fully owned through Equity Group Insurance Holdings is yet another clear sign that the Mwangi-led company is intent on transforming itself into a corporate behemoth with its tentacles permeating virtually all sectors of the economy.
Mwangi said Elak would target all customer categories.
“We realised that the greatest threat to wealth creation is when disaster strikes and the family and entities have no fall-back plan except removing capital from their businesses to meet such expenses,” said Mwangi.
Equity joins a highly concentrated market, with IRA data showing that out of the 24 firms carrying out life insurance, six—Britam, ICEA Lion, Jubilee, Kenindia, Sanlam and CIC commanded 69.9 per cent market share by September 2021.
Equity hopes to leverage its more than 10 million customers to offer other services besides its core financial services business.
Equity has operations in six regional countries—Uganda, Democratic Republic of Congo, Tanzania, Rwanda, and Burundi.
This makes the two diversified financial services firm Britam and Equity Group competitors in the life insurance business.
Their near-two-decade relationship ended in 2015, five months after Britam completed its buyout of Equity’s stake in mortgage lender, Housing Finance (HF).
Britam said Mwangi had voluntarily resigned from its board and described the decision as “mutual,” but left the undercurrents untouched.
“This is purely a voluntary move, agreed mutually with Britam’s board of directors to help us further minimise conflict of interest risks, as Britam has recently enhanced its shareholding in banking services provider Housing Finance (HF),” said Britam Chief Executive Officer Benson Wairegi.
Mwangi decided to step down from Britam’s board two months after Wairegi declined to offer himself for re-election to the EGHL board.
Getting into the banking business by buying out Equity’s stake in HF, which brought its shareholding to 46 per cent in the mortgage lender, was an offensive move by Britam, while Equity’s disposal of its shares was defensive.
This brought a clear shift in the thinking process among the directors.
The buyout of Equity’s stake resulted in Britam increasing its shareholding in the mortgage lender to 46.08 per cent from 21.32 per cent.
The proposed acquisition is expected to give Britam a firm grip on the mortgage industry.
