Kampala- Last week, minority shareholders of dfcu Limited were not going to let the Crane Bank acquisition go without them raising concerns.
The question and answer session was dominated by questions around dfcu acquiring Crane Bank at the end of January 2017.
Mr Rouben Masaba, a shareholder accused dfcu of carrying out the Crane Bank transaction “in secrecy” and the statements issued by their bank “did not give or inspire any confidence.”
This was during the AGM held at the Sheraton Kampala Hotel on Thursday.
Another shareholder asked why dfcu was not disclosing the impact of the Crane Bank transaction on their company.
Another was concerned that former Crane Bank managers were now working with dfcu, bringing their ‘bad culture’ to a stable bank. In response, as they had been prepared, the management of dfcu sought to assure shareholders about the transaction.
“The transaction was not done in secrecy. When you are acquiring a bank, it is not like the normal market where normal products are sold. Dealings within the financial sector, one has to be careful what they say because there are rules that restrict us,” Mr Juma Kisaame, the Managing Director, dfcu Bank told the meeting.
He went on to disclose that they had inherited 850 former Crane Bank employees but later laid off 350 in what he described as a “rigorous process”.
“We did not take on any of the managers considering that most of them were not fit and proper,” he sought to reassure shareholders. On the current dfcu Executive Committee (Exco), there is no former Crane Bank top manager.
Top managers laid-off, however, dfcu fell short of explaining the impact of the transaction and costs incurred during the acquisition.
“You (shareholders) will get full disclosure of the transaction and its impact once the prospectus for the rights issue is completed in about a month,” he said.
In the order of business for the AGM, shareholders were expected to reappoint KMPG as the external auditors for 2017. The ritual has been that this process is smooth sailing with questions rarely being asked. However, even before Mr Elly Karuhanga, the dfcu chairman could get to this business, questions were being asked about KPMG.
“KPMG were the auditors of Crane Bank when it was taken over. They are also our auditors and there is a proposal to keep them on. I have fears I would wish allayed because they are our auditors,” Mr Billy Birungi, a shareholder asked.
“We are confident of the work we did at Crane Bank. It was consistent with our business; which is to inspire business confidence,” Mr Benson Ndung’u, a Partner at KPMG Uganda responded. As the chairman attempted to have a motion for KPMG to be reappointed seconded, there were still murmurs in the room.
It was only until, Dr Winfred Kiryabwire, a non-Executive dfcu Board Member explained that the murmurs reduced.
“According to the Financial Institutions Act (FIA), if external auditors are accused of any wrongdoing, action would have been taken. As far as we are concerned, we have not seen this action taken. Let us not rely on the media,” she said.
Most shareholders approved KPMG’s re-appointment with only four objections.
Bank to raise Shs180b
Additionally, the shareholders also approved a rights issue that would result into the bank raising about Shs180b. According to Mr Kisaame, the rights issue – where shareholders get the first call on new shares at a discounted rate – will be only to raise money to clear a short term loan acquired to capitalize the bank after acquiring Crane Bank. When dfcu acquired Crane Bank, it was required to capitalise in order to fall in line with regulatory requirements.
The majority shareholders in dfcu, Norfinance, and Rabobank secured a $50m (Shs180b) bridging facility from ARISE B.V (the two are shareholders) to capitalise dfcu. Subsequently, NorFinance and Rabobank transferred their interest in dfcu to ARISE.
The approval of the rights issue paves way for dfcu to submit an application to the Capital Markets Authority (CMA) and Uganda Securities Exchange (USE). Details of the rights issue will be in a prospectus expected to in about a month.
Dfcu Bank is the only wholly owned subsidiary of dfcu Limited (listed on the stock exchange).