Last week management announced that it had entered merger negotiations with Stanbic Bank, while Standard Bank of South Africa the parent of Stanbic has reached an agreement to buy out leading shareholders of the company. The resulting merger and take over will result in the creation of a new and relatively large commercial bank - listed on the NSE. Standard Bank has operations in insurance services as well as commercial banking in South Africa, while its international operations are dominated by banking operations. Standard Bank has set its sights on becoming a leading emerging market bank and in the processes has identified some key markets including Kenya and Nigeria in Africa.
The deal as agreed includes a price worked out as the average price over a 4 week period prior to the announcement. This market has just not learnt how to read a company announcement - for control Standard Bank did not pay more than the market price. So why on earth would anyone want to pay Sh.368.00 the close price or worse still Sh.900.00 per share? CFC at Sh.120.00 was already expensive well beyond its peers ..... In the end it will be good for market players to burn their fingers now and in future start paying greater attention to fundamentals. CFC is a great business, CFC the share at current prices is a poor investment. If only we could short sell in Kenya!
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