Kenya’s Mwalimu Sacco edges key shareholder out of Spire Bank, begins search for strategic investor

KENYA – Kenya’s Mwalimu National Sacco has acquired 100% ownership of the trouble-ridden local bank Spire Bank in a tactical move to eventually offload the shares to a strategic investor after close to six years of clinging to an investment that went bust.

The giant teachers’ Sacco finally edged out business tycoon Naushad Merali from the bank in a share-purchase deal deemed as the ticket for attracting deep pocketed investors with much-needed resources and expertise to turn around the loss-making third-tier lender.

Spire Bank’s acting managing director Brian Kilonzo told The EastAfrican that the transaction, which was completed at the end of November, now lays a solid foundation for the struggling lender to attract a strategic investor and kick start its long recovery process.

“This now allows onboarding of a strategic investor to inject funds to ensure regulatory compliance and execution of business growth strategies already developed. This is actively being pursued by the board of directors and shareholders,” said Mr Kilonzo in an e-mail response.

Whether the exit of Mr Merali — the previous majority shareholder and founder of the bank — from the ownership of Spire bank will pave the way for a strategic investor remains to be seen.

The Sacco, which spent US$21.81 million on 75% of the shares in the bank owned by the billionaire businessman in 2015, has concluded the acquisition of the remaining 25%.

The Sacco management declined to disclose the value of the transaction but conservative estimates put the deal at US$7.27 million going by the value of the previous acquisitions in which it paid US$14.54 million and US$6.81 million for 51% and 24 percent stakes respectively.

“This now allows on boarding of a strategic investor to inject funds to ensure regulatory compliance and execution of business growth strategies already developed. This is actively being pursued by the board of directors and shareholders”

Brian Kilonzo – Ag CEO, Spire Bank

Previous attempts by Mwalimu Sacco to sell its stake in the bank collapsed after the suitor — UK-based crypto lender BlockBank — abandoned the deal after expressing initial interest in 2018.

A review of the bank’s books of accounts shows that customers have withdrawn over US$81.81 million worth of deposits from the bank over the past six years (2015-2020), with total deposits falling to as low as US$43.81 million in the third quarter of this year from a high of US$130 million in 2014.

Loans and advances to customers reduced by US$65.09 million to US$26.36 million from US$91.45 million while net losses worsened US$7.12 million from US$2.96 million in the same period.

The bank’s accumulated losses amounting to US$73.9 million have pushed it into liquidity and capital deficiencies with total shareholder funds turning to negative US$12 million during the nine-month period to September 30, while core capital operating in a negative territory of US$21.45 million compared to the statutory limit of US$9.09 million.

Mwalimu Sacco’s investment in the bank has raised eyebrows within the country’s investment circle, with close to 75,000 teachers crying foul over an investment that was carried out without proper due diligence and which has put their hard earned savings at risk.

Mwalimu’s Sacco’s initial investment of US$21.81 million in the bank has since been diluted to as low as US$10.9 million.

Spire Bank initially operated as Equatorial Commercial Bank, prior to its acquisition and eventual rebrand by Mwalimu Sacco

Mwalimu Sacco’s acquisition of Spire bank had been opposed by various agencies until they gave their approvals in 2014.

The Co-operative Alliance of Kenya — the umbrella body of about 15 million-member co-operative movement — raised a red flag over the credibility of the entire transaction, arguing that due process was not followed.

However, even with the opposition the deal was sanctioned by the Central Bank of Kenya, Competition Authority of Kenya and the Sacco Societies Regulatory Authority.

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