CAK Approves Zenith–Paramount Bank Merger, Sets Conditions

The Competition Authority of Kenya (CAK) has approved the proposed acquisition of 100 percent shareholding of Paramount Bank Limited by Zenith Bank PLC, subject to strict conditions aimed at safeguarding jobs.

The Authority said the approval followed an extensive competition and public interest assessment which found that the transaction is “unlikely to lead to a substantial prevention or lessening of competition” in Kenya’s banking sector.

In its decision, CAK stated that while the merger raised a negative public interest concern relating to employment, this could be adequately addressed through mitigating remedies.

“The approval is based on the Authority’s determination that the transaction is unlikely to lead to a substantial prevention or lessening of competition in the market for the provision of banking services in Kenya,” CAK noted, adding that employment concerns would be managed through enforceable conditions.

Zenith Bank PLC, the acquiring entity, is incorporated in Kenya but has no operational presence in the country.

Currently, its parent company is a publicly quoted company that is quoted on the Nigerian and London stock exchanges.

It has operations across various jurisdictions including Nigeria, Ghana, Sierra Leone, Gambia, the United Kingdom, France, the UAE, China, among others.

Zenith deals in a wide variety of services that include corporate and financial service, trade service, investment banking service, wealth management service, treasury service, institutional banking service, and retail banking service.

The target business is Paramount Bank Limited, a commercial bank that provides commercial banking services in Kenya.

It also owns Paramount Bancassurance Intermediary Limited, which provides insurance intermediary services, and PB Capital Limited, which is an investment banking subsidiary.

Transaction Structure and Legal Threshold

The proposed transaction entails Zenith acquiring 100 percent shareholding of Paramount Bank.

According to the parties, the rationale for the acquisition is to strengthen Paramount Bank’s financial position, ensure long-term compliance with enhanced core capital requirements, and reduce reliance on ad-hoc shareholder capital support.

CAK noted that the transaction qualifies as a merger under sections 2 and 41 of the Competition Act, CAP 504 of the Laws of Kenya.

The Act defines a merger or takeover as occurring when an undertaking “directly or indirectly acquires control over another business within Kenya,” including through the purchase or exchange of shares.

The Authority went further to clarify that where the turnover or assets of the merging parties exceed Ksh. 1 billion, a merger is subject to approval.

Zenith’s intended acquisition of Paramount Bank qualifies as a merger that had to be notified since the turnover of the Zenith and Paramount’s assets exceeded Ksh. 1 billion.

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Market Definition and Competitive Assessment

In the course of the merger analysis, the market defining the product market was readily identified.

For instance, there was the definition that the provision of banking services defines the interchangeable nature depending on their characterizing features.

Accordingly, the market defining the geographic market with the analysis underscored that Paramount bank provides its services nationwide.

The banking industry in Kenya is regulated by the Central Bank of Kenya (CBK).

It categorizes the commercial banks according to their gross deposits, customer deposits, reserves and capitals, and account transactions.

Paramount bank is categorized under Tier III and ranked position 33 out of the 39 registered commercial banks in the industry, as of December 2024.

The importance of branch network, banking agents, or ATMs was highlighted by CAK as variables affecting competitiveness in this industry.

Nevertheless, it was observed that digital channels were being used to replace traditional “bricks and mortar” approaches.

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Concentration Levels and Public Interest

As of December 2024, the country had 39 licensed banks, with the four leading banks accruing 47.3 percent market share.

This shows that the market was moderately concentrated.

Using the Herfindahl Hirschman Index, it was clear that the market was unconcentrated since its value was 801.05 both before and after the merger.

Post-merger, Paramount Bank’s market share of 0.2 percent will remain unchanged since Zenith has no existing commercial banking operations in Kenya.

CAK concluded that the merged entity will continue to face competition from banks controlling over 99.8 percent of the market.

As for Public Interest, the issue was employment, competitiveness for SMEs, sectors, and national competitiveness.

While the parties submitted that no negative public interest concerns would arise, the Authority imposed a binding condition.

“The acquirer retains the target’s seventy-eight (78) employees for at least twelve (12) months following completion of the proposed transaction,” CAK ruled.

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