M&A Moment: January 2019

The Competition Authority of Kenya recently approved the completion of several corporate merger and acquisition (M&A) deals. They are interesting in that they reveal some revenue and deal value numbers that private companies, acquirers, and equity funds usually don’t make public.  The deals were all approved with exclusions as the transactions between the affected companies  will not affect competition negatively and they met the threshold for exclusion under the “merger threshold guidelines.”

The deals and exclusions include:

Airline/ Oil/Energy/Mining M&A

  • (The Competition Authority of Kenya [CA-K]) .. Excludes the proposed acquisition of 51% of Selenkei Limited by Frontier Energy as the acquirer assets for the preceding year (2017) was KShs. 225 million while the target’s assets was KShs. 4 million and the combined assets valued at KShs. 222 million meet the threshold for exclusion.
  • Excludes the proposed acquisition of control of Paygo Energy by Novastar Ventures East Africa Fund 1 LP and FPCI Energy Access Venture Fund as the acquirers had no turnover for the preceding year 2017 while the target’s turnover was KShs 2 million
  • Excludes the proposed acquisition of 51% of Cedate by Frontier Energy as the acquirer assets for the preceding year 2017 was KShs. 225 million while the target’s assets was KShs. 355 million and the combined assets valued at KShs. 580 million meet the threshold for exclusion.

Banking and Finance: Finance, Law, & Insurance M&A

  • Excludes the proposed acquisition of 44% of Cellulant Corporation by The Rise Fund Certify, L.P. as the acquirer had a turnover of KShs. 93 million for the preceding year 2017 while target had a turnover of KShs. 752 million and therefore, the combined turnover of KShs. 844 million meets the threshold for exclusion.
  • Excludes the proposed acquisition of 12% of Pezesha Africa with certain controlling rights by Consonance Kuramo Special Opportunities Fund 1 as the acquirer’s turnover for the preceding year 2017 was KShs. 6.2 million while the target’s turnover was KShs. 3.1 million
  • Excludes the proposed acquisition of 100% of Serian Asset Managers Limited by Cytonn Asset Managers as the acquirer had a turnover of KShs. 0.9 million for the preceding year 2017 while target had a turnover of KShs. 1.1 million for the preceding year 2017 and therefore, the combined turnover of KShs. 1.9 million meets the threshold for exclusion.

Agri-Business, Food & Beverage M&A

  • Excludes the proposed acquisition of 99.9% of  Twiga Foods Limited by Twiga Holdings as the acquirer has no operations in Kenya and therefore had no turnover for the preceding year 2017 while the target’s turnover was KShs. 140 million and the transaction meets the threshold for exclusion.
  • Excludes the proposed acquisition of the business and assets of Anchor Flour Millers Company by Archaic Industries Kenya as the acquirer is a natural person with no business activities and had no turnover or assets for the preceding year 2017 while the target’s turnover was KShs. 97.3 million.
  • Excludes the proposed acquisition of class B ordinary shares in Fertiplant East Africa by Oikocredit, Ecumenical Development Cooperative Society U.A as the acquirer is a natural person and had no turnover or assets for the preceding year 2017 while the target’s assets were valued at KShs. 47.5 million.

Health and Medical, Pharmaceutical M&A

  • Excludes the proposed acquisition of 32.5% of the shares with certain veto rights in King Medical Supplies by LGT Capital Invest Mauritius PCC Cell E/VP as the acquirer is a newly incorporated company and had no turnover for the preceding year 2017 while the target’s turnover was KShs. 20.9 million.
  • Excludes the proposed acquisition of 32.5% of the shares with certain Veto Rights in City Eye Hospital Limited by LGT Capital Invest Mauritius PCC Cell E/VP as the acquirer is a newly incorporated company and had no turnover for the preceding year 2017 while the target’s turnover was KShs. 62.1 million.
  • Excludes the proposed acquisition of sole control of Hain Lifescience East Africa Limited Kenya by Bruker Daltonik GMBH as the acquirer’s turnover for the preceding year 2017 was KShs. 102 million while the target’s turnover was KShs. 106 million and the combined turnover of KShs. 208 million meets the threshold for exclusion.
  • Excludes the proposed acquisition of the manufacturing and distribution business of Pharmaceutical Manufacturing Company (Kenya) by Shalina Healthcare Kenya as the acquirer’s assets for the preceding year 2017 was KShs. 0.4 million while the target’s value of asset was KShs. 43 million and the combined value of asset of KShs. 44 million meets the threshold for exclusion.
  • Excludes the proposed acquisition of certain assets of Maghreb Pharmacy by Goodlife Pharmacy as the target had a turnover of KShs. 15 million for the preceding year 2016 and therefore, the transaction meets the threshold for exclusion.
  • Excludes the proposed acquisition of 60% shareholding in AK Life Sciences by CSSAF Lifeco Holdings as the acquirer had a turnover of KShs. 377 million for the preceding year 2017 while target had a turnover of KShs. 125 million for the preceding year 2017 and therefore, the combined turnover of KShs. 503 million meets the threshold for exclusion.

Logistics, Engineering, & Manufacturing M&A

  • Excludes the proposed acquisition of 100% of the shares in JGH Marine A/S and JOHS. Gram-Hanssen A/S by Pitzner Gruppen Holding A/S  as the acquirer has no presence in Kenya and, therefore, had no turnover for the preceding year 2017 while target had a turnover of KShs. 392 million for the preceding year 2017 and therefore, the transaction meets the threshold for exclusion.
  • Excludes the proposed acquisition of the assets and business of Socabelec East Africa by Cockerill East Africa as the acquirer had a turnover of KShs. 193, million for the preceding year 2016 while target had a turnover of KShs. 226 million the preceding year 2016 and therefore, the combined turnover of KShs. 419 million meets the threshold for exclusion.
  • Excludes the proposed acquisition of 55% of  Air Sea Logistics (ASL) by Expolanka Freight PZCO as the acquirer had no turnover for the preceding year 2017 while the target’s turnover for the preceding year 2017 was KShs. 8 million and therefore meets the threshold for exclusion.
  • Excludes the proposed acquisition of the assets of Rich Logistics (K) by Bigcold Kenya as the acquirer is newly incorporated and hence, had no turnover for the preceding year 2017 while the target had a turnover of KShs. 48 million for the preceding year 2017 and therefore, the transaction meets the threshold for exclusion.

Real Estate, Tourism, & Supermarkets M&A

  • Excludes the proposed acquisition of 40% of Dufry Kenya Limited by Ananta Limited as the acquirer had no turnover for the preceding year 2016 while the target had a turnover of KShs. 269 million for the preceding year 2016 and therefore, the transaction meets the threshold for exclusion.
  • Excludes the proposed joint venture between Scan-Thor Group and Otto International GmbH as the acquirer has no market presence in Kenya and, therefore, had no turnover for the preceding year 2017 while target had a turnover of KShs. 11 million for the preceding year 2017 and therefore, the transaction meets the threshold for exclusion.
  • Excludes the proposed transfer of 100% of Norbu Manda Pwani Limited to Margot Kiser from the provisions of Part IV of the as the acquirer is a natural person and had no turnover or assets for the preceding year 2017 while the target’s assets were valued at KShs. 47.5 million.
  • Excludes the proposed acquisition of the business and assets of Giraffe Ark Game Lodge by Archaic Industries Kenya as the acquirer is a newly incorporated company and had no turnover for the preceding year 2017 while the target’s turnover was KShs. 51.5 million
  • Excludes the proposed acquisition of the business of Ocean Sports (2006) by Ocean Sports Hotel as the acquirer had no turnover for the preceding year 2016 while the target’s turnover was KSh. 44.6 million.
  • Excludes the proposed acquisition of 34.48% of African Forest Lodges by Earth Friends Limited Liability Partnership as the acquirer is a newly incorporated company and has no assets or turnover for the preceding year 2016 while the target’s assets was KShs. 197 million.
  • Excludes the proposed acquisition of the (Furniture, fittings, equipment and Prefabricated building) assets of Me To We Limited by Bogani Training Limited, excludes the proposed acquisition of the (motor vehicle) assets of Me To We Limited by Minga Limited and excludes the proposed acquisition of the assets  (vehicles, beads, stocks) of Me To We Limited by Araveli For Mamas Limited as the acquirers had no turnover for the preceding year 2016 while the target’s turnover for the preceding year 2016 was KShs. 68 million and therefore, meets the threshold for exclusion.

Telecommunications, Media & Publishing M&A

  • Excludes the proposed acquisition of 39% of the shareholding in the Star Publication by Avandale Investments and 10% of the shareholding by Adil Arshed Khawaja as the acquirer had no turnover for the financial year ending 30th June 2017 while the target’s turnover was KShs. 679 million.
  • Excludes the proposed acquisition of Mobile Web (trading as Hivisasa) by Novastar Ventures Easy Africa Fund 1 L.P.  as the acquirer had no turnover for the preceding year 2017 while target had a turnover of KShs. 14 million or the preceding year 2017 and therefore, the transaction meets the threshold for exclusion.

Other M&A

  • Excludes the proposed acquisition of Dc Xiang Kenya Company by Lin Bingwei from the provisions of Part IV of the Act as the acquirer is a natural person with no business activities and had no turnover or assets for the preceding year 2017 while the target is a newly incorporated company and had no turnover or assets;
  • Excludes the proposed acquisition of 100% of the shares in Kesar Investments by Dipak Lakshman Halai and Ramesh Kurji Visram as the acquirer are individuals and had no turnover for the preceding year 2016 while the target’s assets was KES 0.07 million

CA-K, as a regulator, has not yet reported on two mega deals; the proposed bank merger between CBA and NIC and the buyout of Kenol by Rubis that will lead to a delisting of the company.

Also, see some other deals approved six years ago.

$1 = Kshs 101

Rubis Kenol Deal Details

The Directors of Kenol Kobil have recommended that their shareholders accept a buyout offer from Rubis Energie as more details have been availed about the deal.

The board faces shareholders at the 2016 KenolKobil AGM

Kenol is second largest in the country of 60 oil marketers. It has 13% market share boosted by 47% share in civil aviation. In retail, they have a 10% share behind Vivo/Shell and Total. Rubis is listed on the Paris Euronext Exchange. It has grown in 15 years by acquiring and managing companies and all its individual businesses are now profitable. SBG Securities have confirmed that Rubis have enough funds for the takeover.

Deal Excerpts

Special Shareholders

  • The offer is a 50% premium price and it is billed as offering shareholders a 100% cash return without broker charges.
  • Rubis owns just under 24% of Kenol that it bought from Wells, on October 2018 at Kshs 15.3 per share. If it takes over the company before October 2019, it will pay Wells an equivalent of the difference that other shareholders are receiving over and above what Wells received.
  • If Kenol announces any dividend now, an amount equivalent of the dividend shall be deducted from the amount due to be paid to any shareholder.
  • Kenol shareholders can only accept the offer in full, not partially. Kenol can vary its offer up to 5 days before the closing date and any shareholder who had accepted will be deemed to have accepted the new terms.
  • Rubis has received irrevocable undertakings from Tasmin Ltd with 4.2% and CEO David Ohana with 5.7% comprising 88 million shares he was granted in an ESOP in January 2017.

Way Forward:  

  • The offer closes Feb 18, 2019, with results announced on March 12.
  • Rubis reserves the right to extend the offer, with the approval of the CMA, but not beyond July 30, 2019. 
  • Shareholders, local and foreign, individual and corporate have been invited to register their interest in accepting the offer electronically on Rubis site  – this takes care of an issue cited in the stalled Victus-Unga buyout in which no response was received from 8% of their shareholder), as either they did not receive their documents through their post office mailboxes in time or did not respond, perhaps because they hoped that a better offer for their Unga shares would materialize.
  • If Rubis attains 90% support, they will force other shareholders to accept, and move on with delisting. If they gain 75% support but fall short of 90%, they may seek shareholder and regulatory approval to delist. Rubis will vote in favour of that and, if 75% approve and not more than 10% oppose it, they will proceed to delist Kenol. If it does not delist, it will remain listed until approvals are obtained or CMA asks the NSE to delist the shares. They caution that if Kenol is not delisted, after the conclusion of this deal, the remaining shareholders will find that the liquidity of their shares will go down, – noting that less than 0.06% shares traded each in a six month period prior to the deal announcement.

Kenya Government seeks Investors for Consolidated Bank

The Government of Kenya has invited local or foreign investors to buy a stake in Consolidated Bank. This comes after shareholders had approved an increase of the authorized capital of the bank by Kshs 3.5 billion through the creation of 175 million redeemable cumulative preference shares which will be allocated to the new investors.

The bank was ranked 30 out of 40 in terms of asset size at the beginning of the year.  Kenyan banks have been impacted by interest rate caps, more so small banks, and Consolidated has also been limited by its capital base which was Kshs 594 million at the beginning of the year. As at September 30 2018, the bank had Kshs 12.6 billion in assets, with Kshs 8.3 billion in deposits and Kshs 7.9 billion of loans.

The Government owns 85% of Consolidated through, stakes were previously partially owned by the Deposit Protection Fund, and through entities including Kenya National Assurance (2001), Kenya Pipeline Company, Kenya National Examination Council, Telkom Kenya, National Hospital Insurance Fund and LAPTRUST Retirement Services. The institutions had deposits in several banks that collapsed in the 1980’s  – such as Jimba Credit Corporation, Kenya Savings & Mortgages, Citizen Building Society, Estate Building Society, Estate Finance Company of Kenya, Business Finance Company, Home Savings and Mortgages, Union Bank of Kenya, and Nationwide Finance Company – and which were then “consolidated” into one restructured bank.

The Government had earlier injected Kshs 500 million of capital into the bank and appointed a transaction advisor in May 2018. Bidders are to register their details and submit their expressions of interest by email before the deadline for tenders on January 23, 2019.

Ghana bank reforms continue

Continuing banks reforms in Ghana, from back in 2018, the Bank of Ghana issued a new statement (PDF) on the state of banking in the country for the end of that year.

It stated that they had inherited a system with distressed banks that were not adequately capitalized, and which had high non-performing loans, and cases of insolvency and illiquidity – largely a result of poor corporate governance, false financial reporting, and insider dealings.

They noted that they had revoked seven licenses and arranged for those banks to exit in an orderly way and that after a recapitalization push, there were 23 banks with universal banking licenses in Ghana that had met the minimum paid-up capital of GHF 400 million (~$83 million) at the end of the year.

Excerpts:

  • The Bank of Ghana had approved three merger applications – (i) of First Atlantic Merchant and Energy Commercial banks, (ii) of Omni and Sahel Sahara banks and that of (iii) First National and GHL banks, as pension funds had invested equity in five other banks through a special purpose holding company called the Ghana Amalgamated Trust (GAT).
  • Another bank, GN Bank, was unable to comply with the capital requirement and its request to downgrade, from a universal banking license, to a savings and one had been approved. 
  • The Bank of Baroda has divested from Ghana following a decision by its parent bank which is wholly-owned by the Government of India. Subsequently, the Bank of Ghana has approved its winding down plan and allowed all the customers, assets and loans of Baroda Ghana to be migrated to Stanbic Bank Ghana.
  • Two other banks Premium and Heritage had their licenses revoked, and a receiver manager from PricewaterhouseCoopers appointed to take charge of the banks. Premium was found to have been insolvent while Heritage had obtained its license in 2016 on the basis of capital with questionable sources. All deposits of the banks were transferred to Consolidated Bank and the Ghana government has issued a bond to support the transfer of assets.

Large Bank Engagement Programs: Nigeria and Kenya

How do large banks engage with the public? Some have programs that go beyond the usual corporate social responsibility – and which go out to address unique national challenges or provide opportunities to large segments of the population who may also be customers of the bank

Kenya scholarships and training.

In Kenya, large banks have some education programs, offering scholarships and support to gifted primary and high school students in different counties. The largest of these has been Equity Bank, which has its “Wings to Fly” leadership program. In nine years, Wings to Fly has given over 15,000 scholarships to needy or financial challenged pupils, 8,000 of who attained the university entrance grade after secondary school.

There are also other entrepreneurship forums, training programs and business clubs.

KCB has a KCB2Jiajiri, a Kshs 50 billion program started in 2016 that aims to benefit 500,000 entrepreneurs in 5 years, thereby creating at least 2.5 million direct and indirect jobs. 

Barclays

Barclays Bank of Kenya launched Ready to Work, a free online training program to help college students and recent graduates get “job-ready” for a world of work. The bank also has a business club founded in 2003 that has supported over 9,000 companies and whose entrepreneur members have traveled to network and trade in over ten countries.

Nigerian bank do mega events:

Access Bank: In December, Access Bank had a huge year-end musical event.

The Bank also hosted a “Born In Africa Fest,” a musical event that was attended by over 25,000 guests.

Ecobank: The bank has a recurring fintech challenge to find financial technology companies with solutions and models that can scale across Africa.

GT Bank

GT Bank stages an annual fashion event called the GTBank Fashion Weekend that brings together fashion and business leaders from around the world to create the biggest fashion experience in Africa.

They also aim to showcase African art in different countries.

UBA: Unique among the banks is UBA, who in conjunction with their Chairman, and his Tony Elumelu Foundation have just launched the fifth year of a $100 million entrepreneurship challenge a philanthropic program that aims to find, train and fund 10,000 African entrepreneurs. So far, over 4,470 entrepreneurs have benefited, and, through UBA in Kenya, over 350 local entrepreneurs in Kenya have received the seed capital of $5,000 for their businesses, training and mentoring, and many of them have been to Nigeria to attend an annual congress of entrepreneurs.

The number of applicants has been increasing each year. Last year there were over 150,000 applicants, and this year applications are all being done via TEFConnect, which is billed as the largest digital networking platform for African entrepreneurs.

The TEF Entrepreneurship Program is open to citizens and legal residents of all African countries, who run for-profit businesses based in Africa that are no older than three years. The deadline for applications submission is March 1, 2019.

Zenith Bank

Zenith Bank held “Style by Zenith,” a flagship Lifestyle, beauty, fashion, accessories and entertainment fair, in conjunction with Fashion One, in the last weekend of December 2018.