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As Diamond Reshapes Africa Ambitions, a Kenyan Bank Benefits

Vernon Wessels
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As Diamond Reshapes Africa Ambitions, a Kenyan Bank Benefits

(Bloomberg) -- Bob Diamond’s change in strategy to build Atlas Mara Ltd. into a pan-African lender are helping a rival Kenyan banker fulfill a long-held objective of expanding on the continent.

The company founded by the former Barclays Plc chief executive officer in 2013 is exiting four of the seven African nations in which it operates in return for 6.3 percent of Nairobi-based Equity Group Holdings Plc. That gives James Mwangi, the CEO of Kenya’s biggest bank by market value, exposure to markets he’s coveted for almost five years, with entries into Zambia and Mozambique.

Equity Group -- which started in 1984 in Nairobi, before spreading across six markets including the Democratic Republic of Congo, Uganda and South Sudan -- wants to be in 15 nations on the continent by 2026 to benefit from rising regional trade and the increased use of digital banking services.

For 67-year-old Diamond, the transaction reshapes his aspirations of building a continental lender. Atlas Mara misjudged the caliber of competition in Africa and ultimately paid too much for acquisitions, just as a commodity-price bust slowed growth across the continent. Atlas Mara will retain its main investment -- a stake in Union Bank of Nigeria Plc -- and its units in Botswana and Zimbabwe, and the deal for the rest gives the company the opportunity to share in Equity Group’s growth, said Chairman Michael Wilkerson.

Strategic Evolution

“The vision on Africa is as sound as it’s ever been,” Diamond said in an interview. “Everything about this is a long-term investment. Banks that were not at scale or not performing well now have a much better chance.”

Wilkerson called the deal an evolution of Diamond’s strategy, focusing on markets where Atlas Mara can find a “path to leadership” and exiting or partnering where the firm is “sub-scale or not making enough money.” Speaking by phone, he also praised Equity Group’s operating skills in being able to make the most out of acquisitions.

Diamond was still optimistic in September 2017 that Atlas Mara could increase its footprint to 10 or more African countries after selling a 42 percent stake to a division of Canadian insurer Fairfax Financial Holdings Ltd. -- a deal that gave Atlas Mara the firepower to up its stake in Lagos-based UBN.

Diamond, who is focusing on investments in European financial services, handed over Atlas Mara’s reins to Wilkerson in February. He remains a top five shareholder and non-executive director of Atlas Mara.

Atlas Mara has no plans to either exit Zimbabwe or Botswana or make new acquisitions, and will focus on further increasing its 49.7 percent stake in UBN and helping that business to grow, possibly through acquisitions, Wilkerson said.

Share Decline

Atlas Mara also posted full-year earnings Tuesday. Its profit fell 13 percent in 2018 because of accounting adjustments and higher costs.

The stock fell 3.7 percent in London, and has dropped about 85 percent since it began trading. Equity Group rose 2.9 percent, extending its advance this year to 17 percent.

Equity is getting the assets at a discount to book value and will combine its existing Tanzanian and Rwandan operations with Atlas Mara’s units in the country.

(Updates to show that Equity is buying Atlas Mara assets at a discount in final paragraph.)

To contact the reporter on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.net

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Keith Campbell, Marion Dakers

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