KAMPALA: The controversial sale of Crane Bank has forced CDC, Britain’s oldest Development Finance Institution to pull out of DFCU bank, according to emerging reports.
The Commonwealth Development Corporation (CDC) is DFCU’s oldest investor after jointly setting up the bank with the Government of Uganda in 1964. CDC’s latest move comes in the aftermath of the fallout from her partner’s fraudulent takeover of Crane Bank with the transaction attracting industry scrutiny over transparency issues which have put its European shareholders in an awkward position.
Crane Bank saga:
Crane Bank Limited was controversially acquired by DFCU Bank which agreed to pay Bank of Uganda (BOU)Shs200b in instalments, has since then made over Shs100 billion in profit, majorly arising out of the acquisition of Crane Bank assets. The deal has left DFCU and BOU in shame more especially that BOU is being investigated by parliament as regard the sale of Crane Bank and several other commercial banks that were liquidated and sold by BOU in the recent times. CDC’s planned exit indicates there is something filthy which might affect DFCU’s international investors’ reputation in the near future.
After the ugly truth about Crane Bank’s deal emerged, many shareholders were not happy that DFCU did not follow corporate governance laws to the letter. For instance, it has been established that Bank of Uganda and DFCU signed a secrecy agreement never to disclosure the contents of the deal which involved the sale of Crane bank at a take-away price of Sh200 billion.
It should be remembered that Crane bank shareholders were not allowed to join the negotiations that left them without a penny after the sale. It has also emerged that Dfcu’s top management did not fully disclose to its shareholders the details of the business but this decision has caused anger among major Investors of the Bank listed on the Uganda Securities Exchange (USE). BOU Staff Retirement Benefits Scheme has 0.59% of the shares in DFCU.
CDC opts out:
Reports now in circulation indicate that CDC on June 14th notified the DFCU Board and other shareholders of its intention to sell off stake.
CDC’s Investment Director Irina Grigorenko, said management was undertaking a review of its investment in DFCU Limited which may lead to the disposal or some of some or all of its shares in DFCU over the short to medium term.
“After being a shareholder for half a decade, it is our aspiration to exit in a manner that causes minimum disruption to the business and ensures the orderly trading of DFCU’s shares,” Grigorenko was quoted in the British Press.
Grigorenko also indicated that CDC’s objective is to identify other investors who can support DFCU in its new phase of growth.”
Analsysts say CDC’s planned exit could be a major blow for the DFCU. It is said that after Crane Bank Ltd shareholders protested the takeover of branches by DFCU, it unsettled the board after CBL insisted that branches weren’t part of the bank as they fall under Meera Investments Ltd. CDC and two other partners opposed the deal and accused DFCU bosses especially the Managing Director Mr. Juma Kasami for not carrying out enough due diligence. The British investor has now acted
DFCU has in recent months been battling former Crane Bank shareholders over property worth millions of dollars.
Former Crane Bank shareholders led by majority shareholder Sudhir Ruparelia and family have dragged BOU to court, claiming their bank was sold to dfcu without considering their interests in accordance with the Financial Institutions Act.
Apart from the CDC, a British government-owned company, dfcu is also owned by Rabo Development from the Netherlands and NorFinance from Norway, who are shareholders in Arise B.V together with Norfund, a Norwegian government-owned Private Equity firm and FMO, the Dutch Development Bank.
Dfcu’s Shareholding by percentages is listed below:
- Arise BV 58.71%
- CDC Group of the United Kingdom 9.97%
- National Social Security Fund (Uganda) 7.69%
- Kimberlite Frontier Africa Naster Fund 6.15%
- 2 undisclosed Institutional Investors 3.22%
- SSB-Conrad N. Hilton Foundation 0.98%
- Vanderbilt University 0.87%
- Blakeney Management 0.63%
- Bank of Uganda Staff Retirement Benefits Scheme 0.59%
- Retail investors 11.19%