Equity Group and Atlas Mara expect to review the terms of their deal in which the Kenyan lender was to acquire from the London-listed firm four banks in Rwanda, Zambia, Tanzania and Mozambique.
Atlas Mara was to be paid in the form of Equity shares amounting to a 6.72 percent stake with a current market value of Sh13.6 billion.
The parties Thursday announced they had not signed a binding agreement for undisclosed reasons, adding that their continued negotiations will likely result in a change of the deal terms.
“While there is no assurance that the potential transaction will be concluded on the terms previously announced, the parties continue to be engaged in discussions,” Atlas Mara said in a statement.
While the parties did not disclose their reasons for failing to reach an agreement, the pressure to renegotiate the deal is likely the outcome of a divergence of fortunes of Equity and the four banks it is eyeing.
The transaction was announced in April last year and since then Equity’s prospects have brightened with the recent removal of lending rate controls.
Its share price — the currency with which it was to pay for the four banks — has gained 32.5 percent since the deal was announcement to Sh54.2.
The Atlas Mara banks, on the other hand, are making losses in aggregate.
Issuing the same number of shares would have seen Equity pay more in the deal that was initially priced at Sh10.6 billion.
For Atlas Mara, receiving Equity’s stock valued at the same Sh10.6 billion would have seen it take fewer shares because of a three-month market run-up.
In the preliminary discussions, Atlas Mara agreed to reduce the value of the four subsidiaries by Sh13 billion to reflect their weaker earnings.
These banking units have a return on equity (RoE) of approximately two percent, according to previous disclosures by the multinational.