Court freezes Equity acquisition of Mwalimu Sacco’s Spire Bank
The High Court has halted Equity Bank’s acquisition of Spire Bank due to a disagreement over the fate of the troubled lender’s employees.
Judge Maureen Onyango of the Employment and Labour Relations Court ruled that the lenders should maintain the status quo until a deal with the employees is reached.
Employees of Spire Bank filed a lawsuit to stop the acquisition through the Bank Insurance and Finance Union (BIGU), claiming their employer had kept them in the dark about the deal.
Equity, which has a Sh1.3 trillion asset base, will acquire Sh945 million in loan assets and Sh1.3 billion in deposit liabilities from the struggling Spire Bank.
Mwalimu Sacco, Spire Bank’s majority shareholder, will pay Equity Sh1.7 billion to cover liabilities.
“That in the meantime, status quo as of the date of this court’s orders to be maintained until either party agrees on suitable undertaking, and is signed by the respondent (union),” Justice Onyango said.
The case will be heard again on October 31 to see if the union and the lender have reached an agreement.
The court dispute appears to be postponing regulatory approvals from the Central Bank of Kenya (CBK) and the Kenya Competition Authority (KCA) (CAK).
The banking regulator had welcomed Spire Bank’s planned acquisition, arguing that it would improve the stability of the Kenyan banking sector.
Equity is the latest tier-one bank to acquire a struggling lender in search of new growth opportunities, following KCB’s recent acquisition of the National Bank of Kenya (NBK).
Mwalimu, which is owned by teachers, first acquired a 75% stake in the lender, which was then known as Equatorial Commercial Bank, in December 2014.
Before reaching an agreement on terms, the union is concerned that its members will be laid off.
According to Mr. Odero, a clause in the CBA states that the union must be involved in material events such as the sale of shares and redundancy, and must be informed of the reasons and extent of the dismissal.
“It is quite clear that the lender is being acquired without stating the fate of the union members, which is a bad labour practice to ignore the employees,” he said.
After signing a buyout agreement last month, Equity hoped to inherit over 20,000 depositors and 3,700 loan customers in the teachers-owned Spire Bank by November.
The acquisition is expected to give Equity a new foothold in the race for teachers’ clientele, with over 100,000 teachers accessing its services across the country.