Ghost of Crane Bank ‘haunting’ DFCU; Oldest Investor pulls-out stake.

DailyNews UG |Okot Johnson|

DFCU Bank is slated to lose its major and oldest investor CDC Group. The Commonwealth Development Corporation (CDC), a British institution has indicated that it will sell its stake in Uganda’s DFCU bank “very soon.”

In an email yesterday, Mr Rhyddid Carter, the CDC Group communications manager, could not confirm or deny the development.

CDC is one of DFCU’s oldest shareholders having teamed up with government in 1964 to start the bank. On June 14, CDC notified the DFCU Board and other shareholders that they would sell their stake. CDC’s Investment Director Irina Grigorenko, said according to foreign press reports that the firm 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.”

Industry Analysts are saying the exit of CDC is related to DFCU’s controversial  acquisition of Crane Bank Ltd in January last year.

It is said that after some Crane Bank shareholders pointed out the loopholes in the agreement and threatened to take DFCU to court, CDC became unsettled.

“They opted out because they did not want to be legally liable if they lost the case,” said a Business Analyst under anonymity.

The “Haunted” DFCU Ownership of Crane Bank

Currently DFCU is still clashing former Crane Bank owners over property worth millions of dollars. This faulted acquisition is still in heated legal battles. Crane bank itself has seriously shaken Bank of Uganda, the regulator.

On 27 January 2017, DFCU took over Crane bank, which had been under the statutory management of the BOU because apparently the bank’s liabilities exceeded its assets. The acquisition included all customer deposit accounts and loans.

Crane-bank ibanda

Above: Crane Bank was previously a member of the Ruparelia Group.

In September 2016, it was reported that Crane bank was actively searching for a strategic partner to acquire shares in the bank. In October 2016, the potential strategic partner was identified as Bob Diamond of the Atlas Mara Limited. Negotiations were still ongoing as of 11 October 2016.

On 20 October 2016, the BOU took over the management of Crane Bank and started a sale process. The thirteen bidders included DFCU, Barclays Bank of Uganda, First National Bank of South Africa, Aethel Partners Limited of the United Kingdom, and General Equity, a New Zealand-based fund.

On 20 October 2016, the BOU took over the management of Crane Bank, suspending its board and acting CEO. This seizure was “apparently” related to the bank’s under-capitalization.

In January 2017, DFCU acquired Crane Bank. DFCU Bank had offered to recapitalise Crane Bank with US$21.6 million after take-over and Aethel Partners Limited offered UGX 1/= for Crane bank’s assets and liabilities and also committed to invest US$215 million in Crane Bank to clean the balance sheet. Whereas DFCU Bank offered to clear all of Crane Bank’s verified debts, Aethel Partners insisted it would clear only part of the failed lender’s debts because of the severe corporate governance and financial risks tied to the bank. These factors boosted DFCU’s bid and eventual takeover of Crane Bank.

Current Dfcu Shareholding percentages:

  1. Arise BV 58.71%
  2. CDC Group of the United Kingdom 9.97%
  3. National Social Security Fund (Uganda) 7.69%
  4. Kimberlite Frontier Africa Naster Fund 6.15%
  5. 2 undisclosed Institutional Investors 3.22%
  6. SSB-Conrad N. Hilton Foundation 0.98%
  7. Vanderbilt University 0.87%
  8. Blakeney Management 0.63%
  9. Bank of Uganda Staff Retirement Benefits Scheme 0.59%
  10. Retail investors 11.19%
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