I&M Holdings Ltd., Kenya’s sixth-biggest lender by market value, said it agreed to buy Giro Commercial Bank Ltd. for an undisclosed sum. The stock surged by the most in 21 months.
The acquisition, which is subject to regulatory approval, comes after the Kenyan Treasury proposed raising banks’ minimum core capital requirements by five-fold to 5 billion shillings ($47 million) by the end of 2018.
“Giro and I&M have many similarities in terms of our target market, approach to banking business,” Chief Executive Officer Arun Mathur said in an e-mailed response to questions. The merger will enable I&M to “service a wider customer base through more branches as well as help to achieve additional business growth.”
I&M shares surged 12 percent to 120 shillings, its biggest gain since Dec. 18, 2013, according to data compiled by Bloomberg.
Giro had core capital of 2.3 billion shillings, Standard Investment Bank said in a research note e-mailed from Nairobi, the capital.
“We think the acquisition will benefit I&M Holdings on the side of branch expansion given that plans were underway to increase its network,” SIB said. The two have similar strategies in that they focus on lending to small- and medium-sized enterprises and on retail banking, it said.
Giro has seven branches in Kenya, including five in the capital, one in the port city of Mombasa and another in the western city of Kisumu, according to its website. The lender, which focuses mainly on short-term lending, had a market share of 0.5 percent at the end of 2014, according to SIB.
The lender may seek other acquisitions in East Africa, Mathur said.
“As part of our growth and expansion strategy, we are always open to interesting opportunities in the region,” he said.