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KCB's takeover of NBK hits troubled waters following parliamentary probe

Kenya's Capital Markets Authority said Aug. 8 that KCB Group PLC's offer to acquire 100% of National Bank of Kenya Ltd. must be approved by 75% of the latter's shareholders after a parliamentary committee advised the government to reject it, Reuters reported.

The Parliamentary Committee on Finance and National Planning's investigation report said the state should instead issue new shares to raise capital for National Bank of Kenya, or NBK. It cited the fact that KCB's offer undervalues NBK far more than the 9% discount previously reported, the newswire said.

According to the committee's report, NBK's fair market value should be 9 billion Kenyan shillings, based on an independent valuation pricing the shares at 6.1 shillings apiece. Meanwhile, KCB offered 3.801 shillings per share for NBK, valuing it at 6 billion shillings, the report said.

Additionally, the regulator previously said in its capital markets soundness report for the second quarter, that two petitioners claim the takeover will result in job losses and have gone to court to try and stop it.

In May, the country's National Assembly began investigating the deal to determine whether NBK's assets were valued accurately and to surmise if the deal was subjected to public participation or whether the country's National Treasury pushed the deal solely in a boardroom meeting.

The Kenyan National Treasury is the largest shareholder in both banks and is effectively negotiating with itself on the deal. It also circumvented the Privatisation Commission, a government body that oversees all state asset sales and mergers and is obligated by law to execute every privatization proposal the government approves.

As of Aug. 7, US$1 was equivalent to 103.50 Kenyan shillings.