The Competition Authority of Kenya (CAK) has conditionally approved Access Bank PLC's acquisition of the entire issued share capital of the National Bank of Kenya Limited (NBK).

This decision marks a significant development in the financial sector, with implications for the employment landscape and market competition.

The acquisition is sanctioned on the condition that Access Bank retains at least 80 per cent of NBK’s workforce for a year following the transaction's completion, as well as all employees of its local subsidiary, Access Bank (Kenya) PLC.

The CAK’s findings indicate that the transaction is unlikely to harm competition within the financial services market.

While there are public interest concerns, particularly regarding employment, the Authority has imposed measures to address these issues.

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Access Bank PLC, a commercial bank established in Nigeria, is a wholly owned subsidiary of Access Holdings PLC, listed on the Nigerian Stock Exchange.

In Kenya, it operates under Access Bank (Kenya) PLC, licensed to provide a wide range of banking services and boasting 23 branches across 12 counties.

The target of the acquisition, NBK, is also a commercial bank incorporated in Kenya and a subsidiary of KCB Group PLC, which is publicly traded and listed on the National Securities Exchange.

NBK operates 77 branches throughout 28 counties, providing retail, corporate, and Islamic banking services.

The proposed transaction includes not only the acquisition of NBK's shares but also indirect control over NBK Bancassurance Intermediary Limited (NBBIL), which is involved in bancassurance.

KCB Asset Management Limited, however, is excluded from the transaction as it has already been transferred to KCB Group PLC.

According to the CAK, transactions with a combined turnover or assets exceeding Sh1 billion require prior approval.

The merger was initially notified to the COMESA Competition Commission, from which the Kenyan aspect was referred back to the CAK for assessment.

In analysing the merger's impact on competition, the CAK defined the relevant market as the provision of banking services, noting overlaps in the operations of the merging parties.

The geographical market, covering services nationwide, reinforces the understanding that competition conditions remain consistent across the country.

As of December 2023, the Kenyan banking sector comprised 39 licensed banks, categorised into three tiers. Access Bank (Kenya) PLC ranks as a tier 3 bank, while NBK is classified as tier 2, ranking 15th out of the 39 banks.

Post-merger, Access Bank's market share will increase from 0.2 per cent to 1.9 per cnet, elevating its classification to tier 2.

Despite this rise, the combined market presence is not anticipated to disrupt competition, as other banks in the sector continue to exert competitive pressure.

The CAK's consideration of public interest noted that the merger could adversely affect employment, particularly as it plans to consolidate operations.

Nevertheless, the merging entities have pledged to retain a substantial portion of the workforce, with 1,384 employees at NBK and 316 at Access Bank (Kenya).

They also committed to compensating employees whose roles may be terminated, adhering to the Employment Act and relevant labour laws.

With the stipulation of these commitments, the CAK has given the green light to Access Bank PLC's acquisition of National Bank of Kenya Limited, paving the way for new dynamics within Kenya's banking sector.