(NAIROBI, KENYA) – NCBA Group shareholders who sold a 66% stake to Nedbank have booked a capital gain of KES21.4 billion ($138 million / £109 million) on the 43.63 million discounted shares of the South African bank. The gain comes after a rally in Nedbank shares since the conversion rate was set in January.
Nedbank revealed last month that Kenyan investors will be handed a stake equivalent to 8.4% of its issued shares in the transaction. The stake was valued at KES10.1 billion ($65 million / £52 million) as per the terms of sale agreed in January. The South African bank is buying the NCBA stake under a hybrid compensation plan. Under the plan, 80% of the consideration is made via a share swap and 20% in cash.
The stock option was done at a conversion rate of 4.02994 shares for every 100 NCBA shares. The Nedbank shares were priced at 250 rand (KES1,928.50) using the deal’s exchange rate. The cash option was priced at up to KES105 per NCBA share. Nedbank will pay KES23.23 billion ($150 million / £119 million) in the cash option and hand the NCBA sellers 43.63 million shares for the equity option.
Since the announcement of the offer in January, the market value of Nedbank shares at the Johannesburg Stock Exchange has risen by 9.5% from 274 rand (KES2,208) to 300 rand (KES2,410). Due to the discount on the conversion rate for the NCBA transaction, the capital gain for shareholders receiving the share based compensation is higher at 19.5% in rand terms. The shares that were valued at KES84.1 billion ($543 million / £429 million) at conversion in shilling terms are now worth KES105.5 billion ($681 million / £538 million) at the current market price.
NCBA shareholders will have the option of either holding onto the Nedbank stock for dividends and future capital gains or selling immediately and booking the gains that have accrued since January. The transaction received approval from the Central Bank of Kenya on Monday. The completion date is set for early October.
Nedbank said most of the regulatory approvals required for the offer have now been obtained. The outstanding regulatory approvals are progressing in accordance with their expected timelines and are anticipated to be received towards the end of the third quarter of 2026.
Nedbank achieved its target of a 66% stake or 1.087 billion shares. This hands it control of Kenya’s fifth largest bank by assets. The multinational received initial acceptances from NCBA owners amounting to 920.65 million shares or 55.88% of the Kenyan bank’s issued shares. Participating investors then exercised an option to sell an additional 395.7 million shares or 24.02% in excess applications to help fill the gap. To limit itself to the planned 66% stake, Nedbank rejected 228.99 million shares from the excess applications.
The excess offer option meant that some of NCBA’s leading shareholders including the families of founding President Jomo Kenyatta and former CBK governor Philip Ndegwa could end up ceding a larger than initially planned stake in the sale. This would happen if they were among those who made available additional units to push the offer over the line.
The Ndegwas’ First Chartered Securities currently controls a 14.94% stake or 246.14 million shares of NCBA. The Kenyattas’ Enke Investments owns 13.2% or 217.49 million shares in the bank. Businessman Muhoho Kenyatta also directly holds 12.75 million shares in NCBA.
The two families were among the top NCBA shareholders owning 77.54% of the bank who had committed to fully participate in the offer. By offering 66% of their holdings, these top owners ensured that Nedbank would get a minimum stake of 51.2% before the participation of other investors.
The Ndegwa family was committed to sell at least 162.46 million NCBA shares to Nedbank. The Kenyattas’ commitment stood at 143.54 million shares through Enke and 8.4 million units via Mr Muhoho’s stake. The two families stood to earn a combined KES22 billion ($142 million / £112 million) from the deal through their stock and cash option. This amount could now be higher depending on whether they were among those who put up additional shares to support the offer.
The deal also represented a good opportunity for the long term owners of NCBA to realise the value of their stock relative to historical acquisition cost. This is thanks to the premium on the sale price. The 1.087 billion shares that Nedbank is buying were valued at KES100 billion ($645 million / £510 million) at the Nairobi Securities Exchange on Thursday. The owners are realising a value of KES128.7 billion ($831 million / £657 million) by selling the stock to Nedbank.
The historical capital gain is even larger. The market price of NCBA shares has been inflated in recent months in reaction to the disclosure of the Nedbank transaction in January and earlier reports of interest in the Kenyan bank by South Africa’s Standard Bank Group.
From 14th October, when Bloomberg reported that Standard Bank was exploring an acquisition of NCBA through its local subsidiary Stanbic Holdings, the share rallied from KES69.50 to KES96.25 within one week. The momentum continued after the 21st January announcement of Nedbank’s offer. It pushed the stock to a record high of KES98.25 before easing back to the present value of KES92.