Equity Bank’s announcement that it had reached a deal to buy four regional banks has drawn interest to the ownership of the lenders and the state of their health.
The bank’s Chief Executive James Mwangi announced plans to buy 62 per cent of Banque Populaire du Rwanda Ltd, 100 per cent stake in African Banking Corporation Tanzania Ltd, African Banking Corporation Zambia Ltd and African Banking Corporation Mozambique Ltd.
Equity Bank had stumbled on a fire sale by Atlas Mara, the company founded by a Ugandan billionaire Ashish Thakkar, who unceremoniously left the entity in 2017 following a divorce case that exposed deals used to spruce up his net worth.
“Atlas seems to be simply getting out as fast as they can from the poor investment decisions made at inception. Atlas had no coherent strategy, too much expense and no operational teams in place to run a successful business,” Deepak Dave of Riverside capital said.
Atlas Mara had been billed to be Africa’s biggest financial institution and at one time wanted to buy Barclays Bank in 2016.
It was co-founded by former Barclays Bank Chief Executive Officer Bob Diamond and went on a buying spree of banks in Nigeria, Zimbabwe, Botswana, Zambia, Mozambique, Rwanda and Tanzania and valued at Sh81 billion.
But as the commodities market in Africa slumped, economies that were riding the narrative of ‘Africa Rising’ plummeted, Nigeria was hit by currency devaluation, Zimbabwe was facing financial woes and mountains of bad loans bore down the investments.
Some of the acquisitions needed cash injections and operational costs could not be contained. “It is a case study of how not to run a bank buyout fund and for investors in the Alternative Investment Market (AIM) , it’s a lesson of how not to buy stocks for Africa based on glamorous public relations (PR) stories fronted by high profile people with no functional Africa experience,” Deepak said.
Atlas Mara may have been one of the biggest PR pitch dappled by the daring claims by Thakkar as being the youngest billionaire on the continent.
In his 20s, Thakkar appeared on Forbes List as Africa’s youngest billionaire and would go to tout the image across media platforms including this paper. Bloomberg, the financial newswire, estimated his fortune at $470 million (Sh47 billion) and noted that Mr Thakkar has been described in videos posted on his foundation’s website as ‘Africa’s Youngest Billionaire’.
He sold the idea of business acumen learned from the age of 15, stowed the importance of ethics and preached philanthropy from the dais of the World Economic Forum, from investments forums to presidents and investors alike, his dream business was closing his pitch.
Rwanda’s President Paul Kagame named Thakkar an adviser and a member of his Presidential Advisory Council where he bought Rwanda Development Bank and Banque Populaire du Rwanda.
“Mr Thakkar started his career by setting up technology business and serves as an adviser to certain heads of State in the Sub Saharan African region. He is a member of the World Economic Forum’s Global Agenda Council on Africa,” his Bloomberg profile reads.
A good story is best laced with a dream which the investor flaunted, having bought a $200,000 (Sh20 million) ticket into space on Sir Richard Branson’s Virgin Galactic passenger rocket. By 2014, the Mara Group had spread its tentacles in banking, real estate, information technology, and agriculture with annual turnover in excess of $100 million (Sh10 billion). According to the Financial Times, the Mara Group is valued at “slightly above” $1 billion (Sh100 billion).
Mr Thakkar teamed up with Bob Diamond who left Barclays under the cloud of controversial risky casino banking and fining of Barclays for libor manipulation, and Atlas Mara conjured up a $600 million (Sh60 billion) bank portfolio by buying banks across African markets.
They rode on the ‘Africa Rising’ narrative, the fact that World Bank put that only a third of African adults had bank accounts in 2014, compared with 94?per cent in rich countries.
They urged patience to investors and made their boldest move when Atlas Merchant Capital entered talks with investors including Carlyle Group, for a possible bid for Barclays Bank, which would have catapulted the Investment fund nearer to its ambitions.
“In response to recent press reports about our alleged interest in buying a 62.3 per cent stake in Barclays Plc Barclays Africa Ltd, Atlas Mara acknowledges that it is in talks with a consortium of investors which studies the acquisition of a participation in Barclays Africa and a potential combination with Atlas Mara and Barclays Africa,” said the investment firm. The deal did not pan out.
Investors started getting jittery and since listing in 2013, the company has lost more than 80 per cent of its value. Meanwhile, a messy separation of Thakkar and his estranged wife Meera Manek threw shade onto the ‘poster boy’ of Atlas Mara.
In October 2016, Thakkar told a family court judge in London that he was worth only about $541,000 (Sh54 million). He also noted that he doesn’t own a stake in Mara Group and that the company was owned by his mother and sister.
A Wall Street Journal investigation showed the Atlas Mara various investments and projects were doing badly and that the investments and assets were worth about $30 million (Sh3 billion) in 2017.
The firm turned to Fairfax Africa for funding to salvage its fortunes, and the new investors decided to replace Thakkar with their own appointments at the board. “Thakkar and Tonye Cole, a founding director and chair of the nomination committee, had stepped down from its board. Michael Wilkerson, Richard Boucher, Quinn McLean, and Hisham Ezz Al-Arab joined as new directors — all Fairfax appointees,” Reuters said.
Diamond became the chairman of the outfit as it sought to manage the turbulent waters. In February this year, the investment firm had to admit that the strategy had failed and the company needed to turn over a new leaf.
Diamond left his role as chairman and returned to his role as a non-executive director of the board. The board has appointed Michael Wilkerson as the executive chair.
The firm announced it will sell some of its assets including considering partnership to consolidate its position. “Focus on the core to maximise value by reducing exposure and or activities in non-core markets; exploring potential strategic partnerships; selectively expanding into new scalable markets,” Atlas Mara said.
It announced a plan to accelerate new digital banking and agricultural finance initiatives, including a memorandum of understanding to consider the acquisition of Fairfax Africa’s 35 per cent stake in GroCapital, a South African financial services provider.
The bank has now reached a deal with Equity Bank Group Holding for a share swap worth Sh10 billion in exchange for four banks in Tanzania, Rwanda, Mozambique and Zambia that will give the London Stock Exchange-listed investment company a 6.27 per cent stake or 252 million shares but subject to the due diligence of the banks’ value.