Kampala. Boardroom negotiations that could result into a merger of some two commercial banks operating in the country are in advanced stages, Daily Monitor has learnt.
The merger if successful, will see both banks – NIC and Commercial Bank of Africa Limited (CBA), operating as one entity, making it one of the top mergers within East Afica’s banking industry.
A merger is an agreement that unites two existing companies into one new company.
Currently, the negotiations are sailing on smoothly and if nothing changes, NIC Group PLC and CBA Limited could become one company by early next year, according to experts familiar with processes and procedures involving mergers.
Apparently, this particular merger appears to have been motivated by the need to expand into new segments and gain wider market share in the region.
This was confirmed in a joint press statement issued Friday last week, where the Boards of Directors of the two financial institutions authorised the commencement of discussions regarding a potential merger.
“Upon successful conclusion of these discussions and subject to approvals from shareholders of the two entities and regulatory authorities, it is expected that the envisaged merger would create one of the largest financial services groups in the region,” reads the statement.
The statement further said: “It is the view of the two Boards that the potential merger would bring together the best in class retail and corporate banks with strong potential for growth in all aspects of banking and wealth management.
“A combined entity would create a complementary base of over 38 million customers, a strong digital proposition and a robust corporate and asset finance offering.”
The two Boards also believe that combining the business of what it describes as ‘two highly profitable’ entities would create enhanced capacity through capital consolidation and strong liquidity to capture strategic growth opportunities.
This would allow it to invest in future growth and in new technology to create enhanced offerings and wider services to its customers. It would also deliver deeper financial inclusion while generating attractive returns to shareholders.
Worth noting is that the eventual merger remains subject to due diligence processes, shareholder, regulatory and other approvals. During this phase of discussions, the two entities will continue to operate independently.
In a separate cautionary notice, CBA warned that if the transaction (merger) concluded successfully, it may have a material (adverse) effect on the price of the company’s securities. For that, security holders and investors are advised to exercise caution when dealing in companies securities.
BACKGROUND OF BANKS
NC Bank. NC Bank Uganda is a subsidiary of the National Industrial Credit Bank (NIC), headquartered in Nairobi, Kenya. It was licensed by Bank of Uganda (BoU), the country’s central bank, on February 15, 2012 to operate retail banking business in the country.
CBA. The Commercial Bank of Africa opened in 2014, following the issuance of a commercial banking license by the industry regulator.
It also headquartered in Nairobi, Kenya, but with subsidiaries across the major regional economies.
The Commercial Bank of Africa (CBA), the parent company, was founded in 1962 in Dar es Salaam, Tanzania. Branches were then opened in Nairobi and Mombasa, Kenya and in Kampala, Uganda. In 1969, the bank sold its assets in Uganda to Barclays Bank of Uganda.
In October 2011, the CBA Group announced plans to enter Uganda. In January 2014, the necessary approval was granted by BoU and CBAU opened as commercial bank in the country.
In January 2016, CBAU applied to the Bank of Uganda to be allowed to make loans using the mobile money platform.