Category Archives: CMC

Case Digest – Kenyan Capital Markets Court Cases

Kenya’s Capital Markets Authority (CMA), has published a digest of legal cases that Authority has been involved in, and some of which were later appealed.

The 27 cases cover ten years, and most the largest share involve dealings at  Uchumi and others revolve around executives and directors of CMC, commercial banks, and a handful on rogue stockbrokers who preyed on retail investors during the heyday of the Nairobi Stock Exchange during the IPO listings of Kengen and Safaricom.

Some notable cases include, Solomon Alubala who was fined Ksh 104.8 million and barred from holding a position at a listed firm for ten years, Bernard Mwangi who attended Uchumi board meetings and sold shares while the company was performing poorly, CMA cases versus Jeremiah Kiereini and  Martin Foster, Chairman and CEO of CMC Motors, the CMA versus the Institute of Certified Public Accountants of Kenya (ICPAK) over audits done by its members at CMC, cases involving Chadwick Okumu, CFO of Uchumi, and CMA versus Jonathan Ciano, a CEO who was for a time celebrated for turning round the Uchumi. They also have a case of Alnashir Popat and Imperial Bank directors, and Munir Ahmed MD of National Bank who the CMA fined Kshs 5 million and barred from holding a position at a listed company for three years.

The cases are published in partnership with the National Council for Law Reporting who have an online database of over 124,000 court cases.

Kenyan M&A

Compared to one year ago

On-Going Deals

Auto’s: – This week Al-Futtaim held a press conference to reaffirm their commitment to African market that is being spearheaded by their takeover of CMC  in Kenya.  More than anything the event was meant to showcase that the group founded in 1930,  but which few in Kenya had heard of before the deal, is a serious legitimate company (unlike shadowy China Road & Bridge that has a $3.8  billion contract to construct a standard gauge railway in Kenya.)
 
They have several car franchises 65 years of Toyota in UAE, Volvo, Honda vehicle assembly parts & service, used car business  and is also in engineering, financials services and the retail mall development business in the Middle East  and Asia
 
Al Futtaim  are long term investors will retain the CMC brand as it has a 65 year good history that will overcome the last two bad years . But they will de-list the company as they believe that being a private company will give them the flexibility to move faster and reclaim customers and brands that have been lost such as Land Rover. 
Interestingly, the opportinuity to buy CMC was presented to them by one of their banks who knew of their interest in Africa. The company then had to work very hard to meet and bring the feuding key shareholders on board to back the buyout.

EDIT Kenya’s competition authority has now approved the acquisition of 100% of CMC Holdings by Al Futtaim Auto

– Scania East Africa Limited  have taken over the purchasing, importing, assembling, fitting out, selling, servicing  of trucks, buses and chassis in Kenya that was previously carried out by Kenya Grange Vehicle Industries.

– EDIT Actis buys 36% of AutoXpress, East Africa’s leading tyre distributor, with 20 stores in Kenya and Rwanda.
EDIT  Merali and Sameer complete buyout of 14.9% of Firestone’s stake in Sameer Africa.


Banking

 
CBA returns to Uganda after 47 years
Fina Bank has changed over its operations in Kenya, Uganda and Rwanda to GTBank East Africa after Guaranty Trust Bank concluded the acquisition of a 70% stake in Fina Bank Group for $100 million through combination of a capital injection and acquisition of shares from Fina Bank shareholders.  
– Pakistan’s MCB Bank to acquire Kenya’s Middle East Bank (via the Standard)
– EDIT Kenya’s  competition authority  has approved the acquisition of 73.35% of Genesis Kenya by Centum Investments
EDIT Letshego Holdings  of Botswana has acquired Micro Uganda, a year after acquiring Micro Africa Ltd of Rwanda.


Food &  Beverage
– Art Caffe acquired Dormans increasing their outlets from 4 to to 11 and giving them a presence in more shopping malls like Yaya, Karen and City Mall in Mombasa where Dormans had shops.
 
However the Art Caffe were rankled by a quite in a local newspaper referring to their customers as being upmarket compared to Dorman’s ones. 

  

EDIT: Kenya’s  competition authority  has now approved the acquisition of 7 coffee shops of Dormans by Art-Caffè.

– Pearl Capital partners have invested $1.5 million in KK Fresh Produce. 

EDIT Kenya’s  competition authority  has approved  the acquisition of Rafiki Millers  by Tiger Brands.
EDIT Kenya’s  competition authority  has approved the acquisition of Magic Oven Limited by Tiger Brands.

Beauty: A Netherlands-based private equity fund, TBL Mirror Fund, has bought a minority stake in a high-end Nairobi salon chain that is seeking capital to expand across East Africa.
 

EDIT 

Advertising: Kenya’s  competition authority  has approved the acquisition of additional 16.48% shareholding in Scangroup Limited by Cavendish Square Holdings BV.
Health: Kenya’s  competition authority has excluded the acquisition of 100% of Adcock Ingram Holdings Limited by CFR Inversiones SPA from the Act


Hotels: South Africa’s City Lodge acquires Kenya’s Fairview Hotel  afterFairview Hotel firm agreed to sell the outstanding 50% of the joint venture 

Insurance: Kenya’s  competition authority has approved the  acquisition of 66.38% of Phoenix of East Africa Assurance Company Limited by Mauritius Union Assurance
EDIT  Britism American (BritAM) completes buyout of 99% of Real Insurance


Oil

– Kenya’s  competition authority  has excluded the acquisition of a 55% participating interest in Block 11A from ERHC Energy by CEPSA Kenya
– Kenya’s  competition authority  has excluded the acquisition of a 55% interest in Block 2B in Kenya from Lion Petroleum by Premier Oil 

Transport
EDIT – Precision Air  of Tanzania seeks a bailout from Kenya Airways?
EDIT – Transcentury to reduce stake in Rift Valley Railways (RVR)?

Other

India  Exits

Ambani reports a Kshs 2 billion profit from Kenya real estate.. Ambani’s Reliance Industries in 2007 entered into a joint venture with Delta Corporation, which has developed high-end office blocks and a mid-to-low cost residential estate in Nairobi. Delta Corporation now says it plans to exit its real estate investments to venture into hospitality and gaming businesses. 

Essar to finalise sale of its Kshs 8.5 billion Yu stake in March ..the firm says it needs the Sh8.54 billion immediately and more cash in the short term to widen its footprint in Kenya and upgrade its network from 2G to 3G.

– Essar also faces a Kshs 430 million hit in its Kenya oil refinery exit ..the government and Essar Energy Overseas are engaged in compensation talks following the Indian firm’s decision to exit the refinery.

New Deals

Agriculture: At Rea Vipingo, Bid Investments withdrew their offer and have signed up with Vania Investments who are offering a new Kshs 55 per share  bid – worth Kshs 3.3 billion ($39 million) –  for the company that will leave it listed at the NSE
 
E-Biz: 


– There’s a potential change in ownership, at MyStrawberryStore 

– EDIT-  Kenya’s  competition authority  has excluded the  acquisition of 999 Ordinary shares 

of My Kenyan Network Limited by African Jobs as the two have a combined turnover of Kshs 12.6 million

Regulator Issues

Pepsi came to Kenya and took on Coke but have not made much impact. They are now saying that has Coke been unfair ..PepsiCo says that rival bottle has been curtailing its marketing campaigns geared at gaining a larger share of Kenya’s soda market in the complaint to the Competition Authority of Kenya (CAK).

Synovate directors risk jail, hefty fines..Competition watchdog asks Tobiko to prosecute Ipsos-Synovate’s chiefs for failure to seek regulatory approval of the firm’s acquisition of its predecessor Synovate.

In South Africa The Competition Commission plans to address anti-competitiveness between retailers despite concluding its exclusive lease agreements probe.

The investigation established that the respondents (3 supermarket chains)  were dominant in certain local markets and that they would often compel landlords not to deal with competitors (by entering into exclusive lease agreements with landlords in return for agreeing to ‘anchor’ the centre).

JobsRwanda’s Agaciro Development Fund is seeking an investment office. Deadline is Feb 14.

Kenya Bank Rankings 1968 Edition

From reading a 1968 book Who Controls Industry in Kenyaa report of a working party comes some history of the Kenyan banking sector. It mentions that in 1968;

– Kenya had 10 banks and all but 3 banks were foreign bank off-shoots.
– They had given loans of loans of £70m, deposits of £83m – a book ratio of 83%, compared to US or UK which had ratios of between 33% to 50%
– Depositors received 3-4% interest on deposits and paid interest of 7-8% on loans [today deposit rates are about the same but loan borrowers pay 12 – 25%]

There were two tiers of banks then;

The Big 3 Banks which 3 held 80% of deposits and 85% of bank assets amounting to K£111 million in 1966 were
Barclays Bank: Had assets of UK£1.4 billion and had 83 branches, and Kenyan directors included Michael Blundell, S. Waruhiu and J. Opembe. Today it has 111 branches
Nation & Grindlays (now KCB):  Had assets of UK £401 million and after-tax profit of £1.2 million. It had 50 branches, and 16 directors who were all British. Today KCB has 165 outlets in Kenya
_ Standard Bank (now Standard Chartered): With assets of UK £892 million and a net profit of £3.1 million. It had 41 offices, 22 directors all British.

Next 7 Banks
– Bank of Baroda
– Ottoman Bank
– Bank of India
– African Banking Corporation (subsidiary of Standard Bank)
– Commercial Bank of Africa
– Algemene bank (General Bank of Netherlands)
– Habib bank

Other institutions
– Cooperative Bank of Kenya (established in 1967)
– National Bank of Kenya (established in 1968)

Finance houses
– Big 3 (licensed as banks)

– National industrial credit (then 40% owned by Standard Bank, now NIC)
– United Dominions Corporation
– Credit finance company (now CFC Stanbic)

Others registered as ordinary companies: 
– Transaction Finance Corporation (subsidiary of Cooper Motor Corporation CMC)
– Industrial promotion services (Now IPS, was est. in 1963 by the Aga Khan)
– Africindo Industrial Development (powerful Asian industrialists seeking credit facilities for exports to India with training for Kenyans there)

Development corporations
The big three commercial banks also owned development corporations to undertake longer-term investments than normal banks accepted; these were Barclays Overseas Development [assets of UK£9m and 88 projects in East Africa], National & Grindlays Finance and Development [B£3m] and Standard Bank Development Corporation.

Building societies
As at 1964, they had loaned UK£3m more than they had in deposits; this was after sudden withdrawal in 1959 of £4m savings by European and Asian depositors.
– Savings & Loan Society
– East African Building Society
– First Permanent (East Africa)
– Kenya building society (subsidiary of Commonwealth Development Corporation CDC)
– Housing Finance Company of Kenya (now Housing Finance)

Regional diversification

Taking regional investments a step further – how are various local listed companies doing on the regional front? January 2008 showed that having a focus on Kenya alone could be an Achilles heel despite it being considered one of the strongest economies in the region. Various listed companies are making pushes in East and Central Africa – however many of these countries are all dependent on Kenyan access, hence its not really true diversification of political risk. In that sense, Olympia Capital, an NSE laggard may be ahead of its peers with its tangled Botswana and South African corporate moves.

here’s a recap:

CMC says regional sales are on target in Uganda and Tanzania (from ½ year results this week)
Diamond Trust has set its sights on Burundi (adding to Uganda and Tanzania) while many other banks have targeted Rwanda
East Africa Cables attribute good performance to their subsidiaries in Uganda, Rwanda and Tanzania
KCB has subsidiaries in Uganda, Tanzania and S. Sudan (though it wrongly had the flag of Sudan on its’ annual report cover. These countries contribute less than 10% to their income and Ug had a loss of 49 million (setup costs) while Tz barely broke even with a profit of 0.2m in 2007. KCB opened in Kampala in November 07 and will open 6 more Ug branches in 2008, 4 new ones in S. Sudan in 08, and another 20 new branches in Tz over the next two years according to their annual report
Kenol who after acquiring Kobil could be the first 100 billion shilling turnover company, have subsidiaries in Uganda, Tanzania, Rwanda, Zambia and Ethiopia. 80% of their sales are from Kenya, while the other countries contribute about 20%.
TPS East Africa acquired 8% of Serena Rwanda which includes Kigali Serena and Lake Kivu Serena. Of Serena’s 2007 sales of Kshs. 3.7 billion (~60 million), Kenya accounted for 64% and Tanzania 36%.
Total Oil Kenya has sister companies in Uganda, Tanzania Congo Rwanda so essentially remain a Kenyan company with 97% of their sales being local. They however complain in their 2007 report that other countries who should be buying from Kenya are (because of our tax regulations) buying offshore and shipping through Kenya instead.
Sameer Africa are looking for transporters to Somalia, DRC, Ethiopia, Rwanda, Sudan, Burundi, Mozambique, Zambia, Malawi Uganda and Tanzania for their products.