Kenya: Equity Bank gets a greenlight to buy Housing Finance

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Oct 2007
Kenya, October, 17 2007 - Equity Bank has been given the green light to buy Housing Finance. The approval from the Treasury, Central Bank and Capital Markets Authority is a milestone that will pave the way for the transaction’s conclusion.

It also ends months of speculation about the future of Housing Finance and brings into fruition the bank’s dream of venturing into the mortgage market.

Housing Finance is expected to proceed with a rights issue planned as a strategy of raising more funds and bringing in new anchor shareholders.

Speculation on the approval has since Friday last week spurred demand for the shares of both Equity Bank and Housing Finance at the Nairobi Stock Exchange, as their stock prices gained by the maximum allowed price change for two days in a row.

“There was huge demand for the both the firm’s shares especially on Monday, but interestingly enough, there were no forthcoming sellers.” said Mr Chris Ruenji, the chief dealer at Sterling Securities.

Housing Finance on Monday closed at  9.1 per cent up to stand at Sh27 on a demand of 182,000 shares but with no registered supply, while Equity stood at Sh115, marking a 9.5 rise in its share price as bids of 316,000 shares were placed although no sellers were forthcoming at this price.

Yesterday, Equity nudged up to Sh119.40 per share, while Housing Finance improved to Sh28.20 on thin supplies as demand overwhelmed supply, standing at 633,700 shares at one time with offers of just 14,600.

In the case of Housing Finance, only 8,500 shares were available against a demand of 122,400 shares. The rise in share prices signals a reversal of fortunes of Housing Finance and Equity Bank following a downward share decline in recent months.

CDC Group, which has a 24.9 per cent stake in HF, waived its rights in a planned Housing Finance rights issue and it is involved in talks with a number of suitors to take over its holding in the mortgage company.

Takeover efforts by a number of interested parties among them Transcentury Group and Baraka Africa Fund failed to bear fruit last year, when news filtered into the market about the deal, leading to CDC’s demand for a higher price.

The move by the CDC group to offload its stake before the rights issue had been informed by the fact that its holding in the mortgage provider would diminish to below 12 per cent should the issue proceed without its participation.

The Housing Finance rights issue is yet to commence as it is predicated on the regulatory approval of the deal.

 

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