Coop rolls out IPO

October 30, 2008

, NAIROBI, October 30 – Co-operative bank has finally launched its Initial Public Offering (IPO) amidst high expectations by major players in the industry that it will be fully taken up.

The bank is floating 701 million shares at Sh9.50 with the hope of raising Sh6.7 billion to finance mortgage products, installation of an ICT infrastructure and expansion of its network.

IPO Lead Transaction Advisor Mohammed Hassan expressed optimism that the share would be fully subscribed despite the bearish market and general lack of optimism among investors as a result of governance issues that have dogged the industry.

“This is a bank that is set for growth and the fact that the money is being reinvested in the bank is a plus. You also cannot ignore that the co-operative movement has a huge membership that the bank will rely on to take up these shares,” Mr Hassan said.

The offer had initially been dogged by uncertainty over whether it would proceed, especially after Nairobi Stock Exchange (NSE) Chairman James Wangunyu hinted that the process might be delayed due to the bearish market.

However, Mr Wangunyu later changed his stand, saying that the market was ready for the offer.

On Thursday, Mr Hassan expressed optimism that the market had already started showing positive gains in some counters which could work well for the IPO.

Also speaking at the launch of the IPO, Mr Wangunyu emphasised that the market was set for a turnaround citing the recent decline in oil prices, the increased supply of fresh commodities and the decline in share prices, which is making them more affordable to the masses.

Co-operative Development and Marketing Minister Joseph Nyagah urged investors and particularly the seven million members of the co-operative movement to participate in the IPO.

“I am also appealing to the corporate institutions to purchase these shares. This joint venture between the co-operators and the corporate can only produce a very successful institution,” Mr Nyagah said.  

The offer closes on November 13 and trading is expected to commence on December 22. Plans for listing the bank started in November last year with the aim to raise capital as well as provide a mechanism through which more than seven million shareholders could access the bourse. This means that all the 3.6 billion shares will be listed but only the 701 million – which account for 19.3 percent – are on offer.

Before the IPO was sanctioned by the market regulator, Co-op bank had to transform from a co-operative society into a public limited liability company.

The firm’s governance structure comprised of over 3,805 co-operatives that controlled 77 percent of the bank while the reminder was owned by 52,000 individuals, thus the need to have one principal body (Co-op Holdings Co-operative Society Limited) controlling the majority shares as a block.

The bank has a total asset of Sh72 billion making it the fourth largest in Kenya. It became a fully-fledged commercial bank in 1994 and has two subsidiaries, Co-op Trust Investment Services and Co-operative Consultancy Services, which offer fund management services and financial and corporate finance advisory respectively.

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