Germany Targets Kenyan Acquisitions

The German government’s investment arm, DEG, is eyeing share buyouts in more Kenyan companies as part of the European economic powerhouse’s strategy to raise its profile in the region.

From left: Chase Bank chairman, Osman Murgian, DEG regional director, Eric Kaleja and Chase Bank CEO, Duncan Kabui during the signing of the capital injection deal in Nairobi on Monday.  Photo/Diana Ngila

From left: Chase Bank chairman, Osman Murgian, DEG regional director, Eric Kaleja and Chase Bank CEO, Duncan Kabui during the signing of the capital injection deal in Nairobi on Monday. Photo/Diana Ngila NATION MEDIA GROUP

On Friday, the German Investment and Development company (DEG) converted a Sh850 million debt in Chase Bank to equity in a transaction that gave it “between five and 10 per cent” stake in the lender.

DEG has in the past invested in Kenyan companies such as Co-operative Bank, Equity Bank and I&M Bank, Rift Valley Railways and IPS.

“We want to strengthen our equity exposure, so we are looking at other equity transactions in East Africa and Kenya,” said DEG’s regional manager Eric Kaleja.

The investment company, which is fully-owned by the German government, said it is in the process of closing two other equity deals with firms in the insurance and forestry sectors.

Mr Kaleja said DEG invests between $10 million and $15 million in a single transaction.

It targets established businesses in growth industries and is currently focused on the financial sector, agribusiness, fast moving consumer goods and energy projects.

The German corporation cut its stake in I&M Bank early this year as the lender prepared to list on the Nairobi Securities Exchange.

The firm hopes to repeat its success in I&M with the Chase Bank deal. DEG and French based Proparco invested €4 million (Sh464 million) in 2007 and Sh1.2 billion in 2010 in I&M to acquire a 21.71 per cent stake in the bank.

The two sold part of their stake early this year to be left with a combined 10.68 per cent holding; DEG’s 6.25 per cent stake and Proparco 4.43 per cent.

This means the partial share sales earned the two development finance institutions (DFIs) a 125 per cent return on their investment —excluding dividend income and their remaining Sh3.3 billion stake.

Chase Bank has been in search of external capital to support its rapid growth and keep it in compliance with industry’s minimum regulatory requirements.

The change from debt to equity will help boost Chase Bank’s capital adequacy ratios.

DEG became the third strategic investor to inject capital in Chase Bank this year after the entry of French-based Amethis Finance in March and Swiss ResponsAbility Participations AG last month.

Amethis Capital invested Sh900 million while ResponsAbility Participations AG injected Sh400 million.

In the nine months to September, the bank recorded a 87.6 per cent growth in after tax profit to Sh1.1 billion.

The lender has diversified into the retail segment through its subsidiary, Rafiki Deposit Taking Microfinance.

It also owns stockbrokerage Genghis Capital and Winton Offshore Investments. State investment firms from Germany, France, Spain, Britain and the European Union have in recent years sought to raise their exposure in Africa and Asia, whose economies have been growing at a faster rate than alternatives available in their home countries.

On the other hand, emerging economies such as China, India and Brazil have been raising their investments in Africa to source for raw materials or provide a ready market for their finished goods.

– Business Daily