Category Archives: Access Kenya

After Office Hours with Kris Senanu at the Nairobi Garage

Last Friday, Nairobi Garage hosted an “After Office Hours ” chat session with Kris Senanu, the Managing Director- Enterprise at Telkom Kenya. He is also a successful venture capitalist with diverse investments and is also a judge on KCB Lion’s Den, a televised local version of the Shark Tank show, in which entrepreneurs pitch for investors to fund their companies.

Excerpts from the Q&A  

Balancing Work and Investments: He has a fun day job at Telkom, but he’s an insomniac and is able to do investing work from 6 PM to midnight. He started investing as a “terrible hobby” when he was 21 and he has a high appetite for risk.

He’s Not Just Invested in Tech: “Investments depends on what is the value to me, the community, country and profitability.” He started his first business Yaka Yeke which was about bringing West African fashion, which he liked, to East Africa. Later he got a partner and started Mama Ashanti restaurant because he wanted to eat West African food and saw there was a demand for that.

He doesn’t own any company. He created Blackrock, with his partners, which he doesn’t manage, to consolidate and oversee his investments. They take a maximum of 33% of equity and let the other shareholders deal with the heavy tasks of managing companies while they provide guidance.  He puts in money based on plans, and milestones and has people who check on those. While he may go serve drinks at one of their bars, he does not dwell on the daily numbers but will read reports late at night.

Funding Decisions: He said a key thing for any entrepreneurs seeking funds from investors was to know what type of money to seek. It was not about “do I need equity or debt?” and what amount to ask for, but also about what you need at any particular time – one is for operational expense, the other is for long-term expense. if you go for equity, there is some money that is good for you, and others to avoid – and some companies get money and right from month one of the new funding, the business or environment changes.

He invests $10,000 to $500,000, and takes on riskier investments – and if it is an area he can add value and scale, it will get investment. He also looks at how passionate an investor is  “are they willing to do this for 10 years or is it just a side-hustle?”. Spreadsheets are powerful tools that guide, but also confuse with numbers that can obscure real basic business. Investment decisions take up to six months as they use evaluate, build relationships with, and get to understand the entrepreneurs.

Scaling Companies:  His main challenge in the last few years has been scalability – as he says there are good businesses around, but they don’t have the ability to scale. While many do okay in a single market or single country, when numbers are good, investors want to see the businesses go multi-market or multi-country.

He said Nairobi has a lot of venture capital, angel funders, and private equity investors – all with money and who are willing to invest in businesses, but that the lot of money is chasing the few businesses that show scalability, and the ability to be sustainable and profitable in the long-term.

Foreigners Getting Start-Up Funding in Nairobi: On this, he said capital will flow to places and spaces where the capital feels comfortable, and entrepreneurs in Nairobi are going to have to make people more comfortable investing big money with us – and to change that narrative about “capital flowing to foreign faces in local spaces.” He said that it could be a case that some local businesses seeking investors were not fully baked and were perhaps at a stage where they were better off going of debt (convertibles/loans) rather than equity funding. He mentioned an episode of the Lion’s Den where someone mentioned Cellulant in a way that offended him. He said that many managers at Cellulant were former colleagues of his and he had watched the company grow for many years, overcoming many tough times as it ventured across Africa. He said entrepreneurs have to, know when to raise capital, know what to ask for, and that Cellulant was now attracting big funding rounds because of their strategic funding decisions and people have to get better at that in Nairobi.

His Work Philosophy: “if you work your whole life for money that is sad; you have to find purpose.” His is to invest in someone else’s visions and help them grow their companies – At Swift, he was employee number 7 and the company grew to 150 staff, while at Access Kenya, he was employee number three, after the founders. He endeavours to grow businesses, create employment, make profits, then exit and move on to the next one.

Night Club IPO? “I have a philosophy is to create one million jobs” but he Knows that is not going to happen through companies, but if he can enable, through his cash, other entrepreneurs to create 10 or 20 or 50 jobs, he will do it. From 2009 he was saving $200 per month, along with some friends who planned to attend the World Cup in South Africa. But he really had no interest in watching soccer and after his wife persuaded him to meet with a young entrepreneur, he ended up giving him the money he had set aside for the World Cup. “I liked the guy, his swag and ideas.” That young man was Amor Thige and the idea was to put money into a nightclub called Skylux Lounge. It later became the top club in Nairobi for several years and changed the nightlife scene.

The Skylux experience led him to invest in another group Tribeka which went on to open five nightclubs – Tribeka, Rafikiz,  Zodiak, Fahrenheit and Natives, and they later added Ebony and Marina Bay at English Point, Mombasa. At its height the group had a turnover of Kshs 87 million a month, rounding out to a billion shillings a year – but what mattered to him more was that the chain was employing 472 people, which was more than the 380 jobs at Access Kenya, a listed company. They also considered doing an IPO for the group, seeing as Kenyans who liked drinking would also like to own a piece of the company, and some of their clubs cost as much as Kshs  60 million to build out. 

Where to Find Investment Information and Data? He said there’s so much diversity in Nairobi and cited a few conversations in sports bars about agribusiness that are leading him into investing in macadamia nuts. He is now doing research, scouting for companies and the best places to grow macadamia over the next few years – “it all depends on who you hang with and the conversations you are having”. He said you can get data on private companies from the right people who have no reason to embellish data, and added that even public companies in Kenya and South Africa audited by top firms are later found to have cooked their books.

Why Telkom Kenya?: He said he entered the telecommunications business while there was a giant monopoly, the Kenya Posts & Telecommunications Corporation (KPTC) – that had low-quality, high prices and poor service – and which constricted the growth of communications at the time. So when Access Kenya was sold to Dimension Data he saw working to revamp Telkom Kenya as his next challenge – to grow a viable challenger that disrupts, gives choice and opportunity in the era of another dominant company (read Safaricom). He sees this as his national service to give back to the people of Kenya, through the government, and the ecosystem, and that while people in the room may not appreciate it now, they will in five years.

Decision-Making:
  • Most difficult decision; firing the smartest person at the company, but who had the worst attitude. it was tough but it was for the greater good of the business.
  • Best decision; sticking to technology. Tech brings change and motion process every day, He’s never bored, he wakes up to have fun. It started while he was selling clothes and Wangari Mathai’s niece asked him to join her at Swift Global and use his sales skills to also sell devices and he’s never looked back.
  • Kris Senanu on his worst decision/regret; not having children earlier.

New African ICT VC Fund

Last week, saw the launch of a new Convergence Partners Communications Infrastructure Fund (CPCIF) from Convergence PartnersIt is a pan African fund that has raised $145 million (from the IFC, EIB, FMO, DBSA and CDC) that they are seeking to invest in companies in communications, fibre, infrastructure, data centres etc. in countries like Kenya , DRC, Rwanda, and Sudan.
The Fund will target established companies with sound management, that are aiming to improve products or quality, or add value to their services – to invest amounts of about of $20-30 million in exchange for stakes of 15-49% with a horizon of about 10 years.

Their past portfolio includes investments in Seacom, New Dawn (with Intelsat) and Internet Solutions (who are taking over at Access Kenya and they plan to open an an East African office soon. 

Separately, in a nice post, @Wanjiku asks if there’s a racial bias in ICT funding from venture capitalists in Africa. 

NSE Moment: Buyouts, Vultures, Divestments

A look at recent deals at the Nairobi Securities Exchange (NSE) and other privatization and equity bids since the last update. 
Divestments
 
Essar released a bombshell from India that they would be abandoning their investment in the old Kenya Pipeline Refineries and sell their stake back to the Kenya Government for $5 million.
At the same time a Receiver Manager put up (the closed) Pan African Paper Mills up for sale, but that is likely to be complicated by links the company had with vulture funds who purchased Panpaper’s debts in the international secondary debt market. These faceless entities — basically different mutations of one group (going by the names like Noon Day Asset Management Asia and Farallon Capital Institutional Partners) — and 11 such firms own 37% of the company’s debt.
The Essar fallout prompted Parliament to also look into the mystery of Orange Kenya which keeps asking for more government support even as the government loses equity in the company.
Since then, the government announced that a new office will advise the government on state investments: Attorney-General Githu Muigai said the Government Transaction Advisory Services Office will guide state deals with the aim of sealing opportunities where the latter has been losing its shareholding in parastatals without monetary gain.
  
EDIT: Another divestment is Kenya Wine Agencies Limited (KWAL) finally exiting Uchumi after disposing of all its shares. It had 18% in 2004 and 4% in 2012. – via @NSEKenya 

Done Deals

Recent M&A deals approved by the Kenya Competition Authority include:

Agri-Business: The acquisition of Juhudi Kilimo (turnover of Kshs 30 million) by Soros Economic Development Fund.

Aviation: The acquisition of Lady Lori Kenya by Ian Mbuthia Mimano, Adi Vinner and Peter Nthiga Njagi.

Education: The  purchase of 60% of Safer World Investments by School Operators Limited (owners of Peponi School) (The two will have a combined turnover of Kshs 672 million or ~$8 million)

Finance & Banking: The acquisition of Francis Thuo & Partners by Equity Investment Bank.
Food: The acquisition of 66% of Coca-Cola Juices Kenya by the Coca-Cola Export Corporation.
The acquisition of Lonrho PLC by FS Africa  (as part of a $280 million deal in South Africa).
The acquisition of Ma Cuisine by Harper Holdings.
Health: The acquisition of Jampharm Chemist by Viva Afya (the two have a combined turnover of Kshs. 19.5 million).
  
The acquisition of Ascribe Group (which has a turnover of Kshs 70 million) by Emis Group.
Deals Bubbling

Brookside Dairies have taken over Buzeki, the makers of Molo Milk, in a Kshs 1.1 billion ($13 million) deal that increases Brookside’s share of the dairy market to 44%. 

EDIT GAZETTE NOTICE No.  15068 – THE TRANSFER OF BUSINESSES ACT


NOTICE is given that the furniture, fittings, fixtures and the assets and the stock being the business of manufacturing and selling of milk and milk products owned by Buzeki Dairy Limited (the “Transferor”) on the premises situated at Ganjoni, Mombasa have been sold and transferred by the Transferor to Brookside Dairy Limited who will carry on the said business of manufacturing and selling of manufacture of milk and milk products at the premises of Brookside Dairy Limited under the name and style of Brookside Dairy Limited (the “Transferee”) with effect from 1st November, 2013 (the “Completion Date”).


The address of the Transferor is Post Office Box Number P. O. Box 85532-80100, Mombasa, Kenya.
The address of the Transferee is Post Office Box Number P.O. Box 236–00232 Ruiru, Kenya.

The Transferee is not assuming nor does it intend to assume any creditors or debtors of the Transferor incurred in connection with the purchase and business of the assets of the Transferor up to and including the Completion Date and the same shall be paid and discharged by the Transferor and likewise all debts and liabilities owing and due to the Transferor up to and including the Completion Date shall be received by the Transferor.

Dated the 5th November, 2013.

KIPKENDA & COMPANY ADVOCATES,

Advocates for the Transferor.

COULSON HARNEY ADVOCATES

Centum shareholders approved new investments in Liberty Beverages, Mvuke Power, Two Rivers Lifestyle Centre, Centum Share Services, Centum Asset Managers (who are buying Genesis Kenya)  and the acquisition of 79% of Kilele Holdings.

Africa Media Venture (AMVF) a Dutch-based venture capital firm has raised its stake in a Kenyan restaurant guide website, EatOut, from 25% to 32% for Kshs 17 million ($200,000) in a transaction that values the online portal at Kshs. 220 million.  
Lonrho is selling its entire stake (11%) in African airline Fastjet. 
 
Crystal Ventures (owned by the Rwanda Patriotic Front) plan to sell their 20% stake in MTN Rwanda, in an IPO which will make MTN Rwanda the third company listed on the Rwanda Stock Exchange – after Bralirwa and Bank of Kigali.
Sameer Investments is buying out 41 million shares that Bridgestone owns in Sameer Africa – after which Sameer will own 159 million shares equivalent to 72% of the company.
Across the border, Tanzania’s Precision Air is looking for a government investment, just a year after an IPO which raised $7 million and reduced the shareholding of Kenya Airways from 49% to 35%
 
Unga Group will acquire Ennsvalley Bakery for Kshs 125M ($1.5 million) and also dispose of its shares in Bullpak.

EDIT: Kestrel Capital has arranged a $1.2 million private placement of convertible debentures in Stockport Exploration to local Kenyan qualified investors. Stockport is listed on the Toronto Stock Exchange and has mining interests in Nyanza Kenya where they are exploring along a prolific gold-hosting greenstone belt. Zeph Mbugua, the Chairman of TransCentury, became a director of Stockport in February this year. 

EDIT:  Swedfund, the Swedish state’s venture capital company, and The Africa Health fund through The Abraaj Group, a leading investor operating in global growth markets, made a $6.5 million investment in The Nairobi Women’s Hospital, a leading private healthcare provider for women and their families (men and children) in East Africa.
Shareholder Restructurings
 
Businessman Christopher Kirubi is acquiring an additional 32 million shares in Centum Investments (for ~$8.6 million) which will raise the stake he controls to about 30% and he has received an exemption from complying with the NSE requirement to make a takeover offer.
 
After listing at the NSE, I&M shareholders have done a swop to bring the company’s investor numbers past the 1,000 shareholder mark.
  
The WPP Group (through Cavendish) is increasing its shareholding in Scangroup from 33% to 50%.  WPP, the largest advertising group in the world, is strengthening its control of Kenya and the East African market ahead of the merger of the two other advertising firms – Omnicom the No 2. in the world  (owners of TBWA) and No. 3 – Publicis (of France)  – which, when combined, will be larger than WPP.
De-Listing’s – Companies leaving the NSE 
Access Kenya Group after their buyout by Dimension Data was approved by the Government
 
CMC is at the conclusion of a buyout offer from Dubai’s Al-Futtaim Group who are offering existing shareholders Kshs 13 a share, or about $90m. 
 
The Dubai-based conglomerate, which holds lucrative distribution rights for Toyota and Honda in its home market, will help the struggling Nairobi-based automotive group expand its brands beyond its existing stable, which includes Volkswagen, Ford, Mazda and Suzuki.
 
R.E.A. Trading, which owns 56% of Rea Vipingo Plantations has offered to buy out all other shareholders at a price of Kshs 40 per share, representing a 43% premium. The shares that have since been suspended from trading and will be delisted from the NSE if the deal succeeds.
Stalled Deals
There was a Financial Times (FT)  article on queues forming to buy up East African retailers but deal opportunities at Nakumatt and Naivas have been hampered by shareholder/family disputes that darken their buyout reputations and possibilities.

Access Kenya EGM

This morning saw what was likely the very last shareholders meeting of Access Kenya, as a public company. The Company Secretary reported receiving 11,207 proxies representing 85% of the shareholders at the extraordinary general meeting (EGM) that was to vote on the de-listing of all the issued 218 million ordinary shares of the company form the Nairobi Securities Exchange following a buyout offer that the board of directors had already endorsed and which 75% of the shareholders had voted in favour of.

A few of the retail shareholders present asked lots of questions about the deal, and it seemed they were unhappy that just over five years after they bought shares in the company at an IPO, after which the share had risen to 38 shillings, before dropping to Kshs. 4, and getting low inconsistent dividends, in between, they were now being evicted from the company.  

Some questions/topics raised:
– Why sell out for Kshs 3 billion (~$35 million) that could easily have been raised locally? The Directors 
– Was there a capital markets (CMA) rule on the minimum number of years that a company had to remain listed after an IPO? The directors said there was none, and the regulators had approved all decisions taken by the directors in the deal 
– Some shareholders said they had bought shares at about Kshs. 18, and were taking a big loss. Directors replied that Kestrel Capital, as an independent advisor, said Kshs. 14 was a good price to take and that Kshs 14 was a big improvement  from the Kshs 4 low in the past year, and Kshs. 9 when the deal was announced and shares frozen. 
– Were the needs of minority shareholders considered in the negotiations, and why didn’t the majority shareholders simply reduce their stakes, instead of selling the company outright?
– Why was the offer to retail shareholders structured as an ‘unconditional’, mandatory one? The directors said that no one was being forced out of the company and that any shareholders who wanted to remain could do so, and they will still receive annual audited accounts from Access Kenya..they noted that there were still some shareholders of Unilever Kenya which delisted  in 2009
– What is the fate of employees who own shares in the ESO..and will they be arm-twisted to vote the shareholders’ acceptances past the 90% threshold? The directors said Dimension Data was a $6 billion company who’s parent was a $100 billion one with ambitious plans for Access Kenya and Eastern Africa.

The final results of the shareholders voted will be tabulated by Deloitte and released in two days – and payments should be made to shareholders in September 2013. 

Nairobi New Media Stocks, 5 Years Later

It’s been over five years since a wave of new media stocks appeared at the Nairobi Stock Exchange  (NSE) including Access Kenya Safaricom, and Scangroup. They are all in the news this month, but for different reasons.
For Access Kenya, the deadline for shareholders to vote on a takeover by Dimension Data was extended by a day due to a national Holiday last week, However, Dimension Data just announced that they have received acceptances from 75% of shareholders and approval the Competition Authority of Kenya and will now proceed with the takeover which will lead to a de-listing of Access Kenya at the NSE.
Safaricom shares seem to have stabilized in the Kshs 7-8 price range after spending quite a bit of time at Kshs 3/=, well below the IPO price of Kshs 5/= in 2008. This disillusioned a lot of retail shareholders who bought their shares hoping to quadruple them when they listed but then had to sell them at a loss. The company has since weathered many changes but remains the market leader in Kenya, thanks largely to M-Pesa and the floundering of their rivals (Orange, Airtel and Essar).
Scangroup got an investment from the WPP, in 2008 who gained a controlling interest for about $18 million. The shares traded at about Kshs 72, and while they have lagged other shares this year, this is still a tremendous gain from the IPO price from Kshs 10.45.
This week, WPP announced, that they would seek to increase their stake to just over 50% in a deal worth about $95 million. This will be done through a combination of cash, new shares and exchange of partnerships in joint companies (Ogilvy & Mather, Ogilvy Africa, Ogilvy (in Kenya, Tanzania, Mauritius) Millard Brown (East Africa, and Mauritius), and Hill & Knowlton (East Africa and Africa) which will become full subsidiaries of Scangroup over the next one year.