Category Archives: Coca Cola

Almasi & Coca Cola

Almasi, the holding company for three Coca Cola bottling plants (Mt. Kenya Bottlers, Rift Valley Bottlers, Kisii Bottlers), had 2014 revenue Kshs 6.7 billion (up from 5.8 billion) and a pre-tax profit of Kshs 516 million (up from 256M). The company, which is 51% owned by Centum Investments, will pay out a dividend of 0.12 per shares (total Kshs 92 million) to shareholders.

The company has installed a new, and faster, glass bottling line and will launch a plastic bottling one at Nyeri in 2016, in line with trends in the beverage business where plastic, not glass bottles, are the preferred buy choice by consumers.

Almasi distributed about 29% of the Coca Cola products in Kenya, equally spread by the three plants and they see the governments plans for Northern and Eastern Kenya where improvements in infrastructure (around LAPSSET) and security over the next few years as an opportunity to open up new markets for their products.

The company also has a few tax claims from the Kenya Revenue Authority, but the directors don’t feel they will materialize.

$1 = Kshs 102

Reading the Tea leaves at Centum, Kenya Airways, Safaricom

Three companies that had their year-end in March 2014 have just published their annual reports which are now found on their individual websites. 

Centum
Has  a (massive ) 160 page annual report and 37,000 shareholders

  • At the August 2014 AGM shareholders will be asked to approve items including:
  1. The incorporation of Two Rivers Property owners Company
  2. The incorporation of Two Rivers lifestyle Centre limited Kenya branch
  3. The acquisition of 30% shareholding in Broll Kenya
  4. The acquisition of 73% shareholding in Genesis investment Managers Kenya
  5.  The incorporation of King Beverages
  6. The incorporation of Bakki Holdco
  7. The incorporation of Shefa Holdings

Other Notes

  • Rent income went from Kshs 6 billion in 2013 to Kshs 17 million in 2014?
  •  Other income was Kshs 443M, up from 12M
  • Cash flow went from Kshs 1.5B  to (minus)  -448<
  • The restated accounts have Kshs 237M paid to company shareholders, yet there are no dividends declared to be paid this year
  • For Genesis, they paid 1 billion for a company worth 153 million
  • They raised Kshs 4.1 billion in 2012 at about 13%
  • Centum Exotics owe Kshs 2 billion, Centum developments owe 1.8 billion and Two Rivers owe 2.5 billion to the company
  • 81% of investments are in Kenya, 13% in East Africa, and 5% outside and 87% of the groups assets are not held on any stock exchange. Centum’s investments include 17.8%  of General Motors East Africa, 15% of NAS Air  services, 27% of KWAL, 27% of Nairobi Bottlers & 43% of Almasi (Coca Cola bottlers), 35% of Platinum Credit, 1.6% of K-Rep bank, and 21.5% of AON Minet & 13.8% of UAP insurance companies

Kenya Airways (KQ)
130 page annual report and has 77 000 shareholders.

  • Are owed Kshs 156 million of Precision Airline of Tanzania (down from 242M)  and they own 41% of the airline.  KLM owns 27% of KQ. KQ are owed 4 billion by Aircraft Cargo Handling  and they owe the company back 7 billion
  • Have 12 year loans with Afrexim, Citibank, Stanchart that are guaranteed by USEximBank, while Co-Op bank financed purchase of a spare Embraer engine. The loans are at rates of 3.5 to 6.5%, and total $1 billion
  • KQ has paid Kshs 27 billion in airline deposits, and got a refund of about Kshs 2.8 billion in 2014 (from Boeing?). KQ also has Kshs 26 billion of aircraft lease commitments in the future.

The B787-8 aircraft will replace the B767- 300s on a one for one basis. The B777-300ERs provide growth in capacity. The B737-300s exit the fleet as JamboJet gains it’s Operating Certificate and determines its own fleet requirements. Two of the E170s will be returned to the lessor as will two B737- 800s, which will be replaced with new leased aircraft. KQ Embraer 190

The most important project for the Information Systems team during the year under review was the Boeing 787 e-Enabling project. The project was set up in February 2013 to implement the e-Enabling platform design recommended by Boeing for the B787 aircraft. The purpose of the e-Enabling platform is to ensure secure transfer of B787 Aircraft Software from Boeing servers to Kenya Airways servers and subsequently into the B787 aircraft.

  • JamboJet lost Kshs 118 million so far, but KQ will apply a deferred tax of 221 million from Flamingo, their previous low cost subsidiary airline against that
  • KQ sas 4,000  employees and also has an ESOP that has been inactive since 2006 (with 2 million shares) . While outgoing CEO Naikuni (famously) still has no shares, directors with shares include Alex Mbugua with 25,000 while Chairman Evans Mwaniki has 42,000.
  •   Spent Kshs 40 billion on fuel & oil, and 8 billion on aircraft hire. Have  Kshs 1 billion in fuel derivatives
  • Have Kshs 106 billion in revenue (85% from passenger flights) and 89% of revenue is foreign (i.e. non-local flights) and they fly to 62 foreign destinations
  • Putting a damper on Africa Rising, the Chairman’s statement notes that

African airlines international air travel expanded by 5.5% in 2013, a solid result but slower than growth in 2012 (7.5%). Overall, the demand backdrop for carriers in the region was strong, with robust economic growth of local economies and continued development of internationally trading industries. But some parts of the continent showed weakness, including the South African economy which recently experienced a slowdown. There has also been some slowdown in regional trade growth

  • The Kshs 5 billion loss in 2014 is an improvement from an 11 billion loss the year before.

Safaricom
136 pages and has 660,000 shareholders.

  • The Communications Authority (ex-CCK) gave Safaricom credit of Kshs 542 million against a license of Kshs 696 million.

Safaricom’s operating licence was issued for a period of 15 years from 1 July 1999 to 30 June 2014. On 25 June 2014, the Communications Authority of Kenya (CAK), formerly the Communications Commission of Kenya (CCK), confirmed the renewal of Safaricom’s operating licence for a further ten years from 1 July 2014 to 30 June 2024 at a renewal fee of USD 27 million.

  • Own 32% of TEAMS  (up from 22.5%). The company  acquired 10% at a cost of (just) Kshs 550, 620?!  TEAMS  had revenue of Kshs 382 million and a profit of Kshs 42 million in 2014. In 2013 they paid Kshs 556 million for the remaining 49% of One Communication which also has a deferred tax asset of Kshs 204 million.
  • There is an M-Pesa holding company that is separate from the company and who are trustees of all the funds that are held in M-Pesa. There is also a Safaricom Foundation that participates in many (small) projects and an M-Pesa foundation that is involved in larger (and fewer) projects.
  • Have Kshs 12 billion of bonds that retire in the next 18 month (7 billion in Nov 2014 and 4.2 billion in Dec 2015)
  • Bonga points; 84% of the points redeemed were for non-merchandise items (airtime, voice minutes, data bytes and SMS) while 16% were redeemed for merchandise items (phones, tablets?) in 2014.
  • The company bid and won a Kshs 201 million deal to brand Kasarani stadium and gymnasium
  • Lipa Kodi has 88 housing agents collecting rent from 60,000 houses while 122,000 merchants have signed on with Lipa Na M-Pesa
  • Directors: Chairman Nicholas Nganga has 885,00 shares, Michael Joseph has 2.3 million, Esther Koimett 517,000 and CEO Bob Collymore has 908,000
  • The newspapers in August 2014 note that shareholders will be asked to approve base station purchase from Yu for $1 million

Private Equity Moment

Following the January  post on M&A deals, here are some recent events.
The Private Equity Confidence Survey was published by Africa Assets and Deloitte and it showed that, in 2012, private equity firms invested $1.13 billion towards 58 deals in Sub-Saharan Africa. This was a a slight decline from 2011, and that Kenya, Nigeria and South Africa accounted for 45% of the deals in 2012.  Also in the survey;
– Despite the enormous hype surrounding Kenya’s growing IT sector, dubbed the “Silicon Savannah”, no IT or venture capital deals were reported in eastern Africa in 2012. This clearly reflects that both the IT sector and VC industry in eastern Africa, and indeed Africa more broadly, remain quite young and underdeveloped. Interestingly, IT-Tech deals were done in 2012 in South Africa, Ghana, Nigeria and the DRC.
–  One conference speaker on VC deal structuring said the problem is ‘Kenyan entrepreneurs believe they each have a fantastic proprietary idea, and they want lots of money up front to develop it, regardless of the lack of business model planning done by many of them. 
– The dominant exit route across Africa is a sale to a strategic investor..and most investors expect the average investment lifecycle to be between two to five years.
Recent M&A deals approved by the Kenya Competition Authority include:
Agri-Business & Food
– The acquisition by Almasi Beverages of Kisii Bottlers, Rift Valley Bottlers and Mount Kenya Bottlers
– The acquisition of Lord Erroll Limited by Koita International Kenya. EDIT – The Business Daily in August 2014 wrote on the Lord Erroll buyout
– The acquisition of Ocean Agriculture (EA) by JH Verwiel.
– The acquisition of Siret Tea Company by Siret Outgrowers Empowerment & Produce Company.
– The acquisition by the Rai Family of shares of Sukari Industries.
Banking, Insurance & Finance
– The acquisition of I&M Bank by City Trust Limited.
– The acquisition of PSJ & Associates by PKF Kenya.
– The acquisition of 66.66% of Mercantile Insurance by Colina Holdings
Building, Energy & Real Estate
– The acquisition of shares in Cemtech (who were to put up a cement factory in Pokot) by Rock Field Corporation.
– The acquisition of Economic Housing by Mali Rasili Group.
– The acquisition of all assets of Mutonga Mutuandaju Small Hydro Power  (a hydro-power project in South Imenti, Meru) by Intrepid Energy.
Health & Beauty
– The purchase of shares in Alexander Forbes Healthcare by Zanele Investments Holding Company
– The acquisition of the health and beauty business (cosmetic & hair brands) of Interconsumer Products by L’Oreal East Africa
– The acquisition of certain assets & liabilities of RTT Health Services by Imperial Group
– The acquisition of Lyntons Pharmacy by Luwada Management
– The acquisition of Star Biotech Lab & Diagnostics (a pathology lab) by Metropolis Health Healthcare
– The acquisition of an indirect interest in the assets of Strategic Industries Limited.
Media & Communications
– The acquisition of Alldean Networks Limited by ISAT Africa Limited FZC and Richard W. Bell.
– The acquisition by EMC Acquisition, LLC and Emerging Markets Communication, LLC of EMC, LLC.
– The acquisition of shares in Dodhia Packaging Limited by Corpak Africa and Corpark Kenya
– The acquisition of  the investment in Rodwell Press held in Interlabels Africa by Interlabels Industries Private Limited.
Oil & Mining 
– The acquisition of Aviva Mining Kenya by Africa Barrick Gold (from Aviva Corporation)
– The acquisition of 87.25% of Pacific Seaboard Investments Limited by Tardigrade International Inc.
Tourism
– The acquisition of East Africa Safari Ventures by Natural Habitat Safaris.
– The acquisition of 80% of Nairobi Tented Camp  by Porini Limited.
– The acquisition of Leleshwa Safari Company  by Natural Habitat Safaris
– The acquisition of Vittoria Limited and subscription of shares in Olarro Conservancy Limited by Arabian Ranchers Property Investments
Transport, Engineering & Logistics 
– The acquisition Swift Global Logistics by DSV Air & Sea Holdings
– The purchase of 55% of Tradewinds Aviation by NAS Africa Aviation
– The acquisition of 60% of Treadsetters Tyres by Bharat Doshi, Aashit Shah and Carlet Overseas Corporation.
– The acquisition of 40% of Tredcore Kenya by Magister Limited
– The acquisition of Vtechnologies (Kenya) Limited by UHT SAS.
EDIT
More deals approves in May 2013
– The acquisition of the remaining shares in Cable Television Network by Wananchi Group
– The acquisition of 99% of Microensure Advisory Services by Microensure Holdings
– The acquisition of Brightermonday.com by Cheki Africa Media.

– The acquisition of 1,680 steers and 792 cows from Delamere Estates by Ngombe Ltd 
– The acquisition of 80% of Altech Kenya Data Networks and 100% of Altech Swift Global Limited by Liquid Telecommunications Holdings
–  The acquisition of the business of Daru Shifa Centre by Viva Afya
– The acquisition of Endebess Estates (Kilifi Holdings)  by Ballobhai Chhotabhai Patel.
 
Other recent deals in the News
– Jacana Partners and InReturn Capital announced a merger, and plans for a $75 million SME Fund
– 88mph and the eVentures Africa (eVA) Fund announced a partnership to improve investment opportunities
– Does Tuskys Supermarket want to buy Ukwala  a rival supermarket chain?
– 90% of I&M Bank shareholders have accepted the takeover by City Trust Ltd and the deal makers have been granted a 2 week extension to reach out to the remaining shareholders. Next steps include a share split.  mandatory acquision of the balance of shares, and a possible NSE-listing on June 12.
–  Airtel signed an agreement to fully acquire Warid Uganda – the combined entity will remain the number two carrier in Uganda with 7.4 million customers  and a market share of 39%.
Fastjet and the CEO of Fly540 agreed to cease their court battles and work towards an acquisition of Fly540  – freeing FastJet to commence Kenyan operations.
– A summary of China investments around the world in the year 2011.
–  In the US, M&A of VC-backed startups are at a four year low.
–  Venture capital merger and acquisition activity in the US dropped in the first quarter of this year, ending with the fewest exits since the first quarter of 2009, according to the just-released venture report from Dow Jones VentureSource.
Some 86 M&A transactions were done for a total amount of $4.3 billion, down 44% in deal activity and a decline of 24% in capital. In the final three months of last year, 113 deals brought in $7.6 billion to the VC-backed startups.
– Companies raised $6.36 billion in the first quarter of 2013, the lowest amount raised since the third quarter of 2010, when $6.1 billion was raised. In the first three months of the year, 752 companies were funded, which is similar to the 732 companies that got funded just over two years ago. Healthcare deals accounted for almost a third of the invested capital.

EDIT Jambo Biscuits food processing business is being transferred Kilimanjaro Foods.

Kenyan M&A

The Kenya Competition Authority recently approved for several corporate deals to be completed. Some of them were mere rubber stamping formalities, as the deals originated far away or had little in the way of local competition that would compel the authority to intervene. 

They covered a variety of sectors including: 
Agro-Processing
– (The acquisition of) The flower growing business of Finlay’s Horticulture Kenya by Lamorna
– (The acquisition of the) Residual business  of Agrifresh Kenya by Finlays
– (The acquisition of)  Sarkish Flora Ltd by Africa Blooms Limited.
Oil & Mining
– Acquisition of 100% of Cove Energy Plc by Shell Exploration & Production (Thailand) 
– Acquisition of  100% of Dominion Petroleum by Ophir Energy Plc.
– Pacific Wildcat Resources Corporation acquiring 100% of Stirling Capital  (UK) and Cortec Pty (UK)
– Elsewhere, there are new (and controversial) that have been proposed that mandate for local shareholders to own 25% of petroleum companies and 35% of mining companies (read more) 
Money & Finance
– Acquisition of 100% of Aureos Capital by Abraaj Capital
–  Acquisition of Grant Thornton Kenya by PKF & Associates (which continues to be in an expansion mode even after taking over DCDM)
– (The acquisition of) Additional shares in Pan Africa Insurance Holdings by Hubris Holdings
– Acquisition of Credit Reference Bureau (Holdings) Limited by Transunion Netherlands (part of the credit giant Transunion
– 62.52% of Micro Africa  by Letshego Holdings (of Botswana)
Tourism
– (100%) of  Ol-Seki Ltd by Hemingways Holdings
Manufacturing & Engineering
–  The acquisition of selected assets of Raffia Bags Kenya by Polycem Bags
 –  The acquisition of 62% of Civicon Ltd by Transcentury Engineering & Contracting
  
Service
– The acquisition 75% of Nairobi Java House by Emerging Capital Partners Africa Fund III. The deal won the AI  deal of the year  award and last weekend was featured on the Citizen TV piece called Who owns Kenya  (video)
Others
– Shoden Data Systems (Proprietary) by Hitachi Data Systems Europe (a sub-Saharan territory deal)
–  Kingfisher Properties  by Mahesh Sanghrajka & Aasheet Sanghrajka.
– Centro Suburb Ltd by  Westlands Triangle Properties
On-Going
Following on three earlier deals: 
– Barclays & Absa are back in the news, six years later
– The shareholders of three bottling companies in Kenya have agreed with a Coca Cola  plan to merge them under a single company Almasi, with one board of directors and CEO and cut other costly production redundancies
– No word on Kenol. 

In the News
Other ongoing deals, yet to be concluded include: 
Money & Finance
– Deloitte East Africa merging with Haile Solomon & Tekeste (Ethiopia)
–  The I&M Bank and City Trust deal
–  I&M Bank Limited buying 55% of Banque Commerciale du Rwanda
– EcoBank Kenya pursuing an undisclosed local investment bank
– UAP Holdings pursuing an undisclosed Tanzanian insurance company
Other
– Australian firm Aviva Corporation (Australia) selling stakes of Kenyan subsidiary to Africa Barrick Gold (ABG)
–  Copy Cat buying 51% stake of Seal Africa
– Low cost airline, FastJet which took over the routes of Fly540 in Kenya and Tanzania, also plans to take over the collapsed operations of South Africa’s 1-time airline for $0.12
– The Woolworth – Deacons deal    

Arranged Corporate Marriages

Some local merger activity of note
 
Barclays of UK and South Africa’s Absa Group are in talks to merge their African operations – but this is not really new as the plan was set in motion six years ago. 
There’s no certainty the talks will lead to any deal, which wouldn’t be completed until 2013, the banks said in a statement. The combination would affect assets in Kenya, Botswana, Zambia, Tanzania and Ghana. 
Barclays, based in London, bought 54 percent of Absa in 2005 for $4.5 billion to expand in emerging markets. Absa dropped its original plan to buy the Barclays assets in 2008 after commodity-driven economic growth in Africa sent their earnings surging, making the businesses too expensive to acquire. Barclays revived the plan in April 2011, aiming to consolidate operations at Absa headquarters in Johannesburg and move other work to Dubai, but Barclays’ listed subsidiaries in Kenya and Botswana will be maintained.
Coca Cola have prepared the Information Memorandum (with D Capital Partners, UK) to persuade local coca cola shareholders to buy into the deal that will see their shareholding in three local bottlers – Mount Kenya Bottlers, Rift Valley Bottlers and Kisii Bottlers merged into a new holding company called Almasi.

Coca Cola dominates the non alcoholic beverage in Kenya with a 78% market share, leaving EABL, Kevian, Del Monte, Excel with 2-4% each. The global giant  has 6 bottling licensing agreements in Kenya with Coastal, Equator, Rift Valley, Mount Kenya, Kisii and Nairobi – which itself was boosted by earlier partnership deals ( with Flamingo Bottlers and East Kenya Bottlers Limited).  The three bottlers each which each sell about 9% of cokes cases, will become Coke’s second largest after Nairobi with about 28% of sales. 

Peeling back Almasi
The boards of the three have approved it and now have to sell the deal to their shareholders as a potential value addition through increased revenue and cost savings of Kshs 2.5 billion ($29 million) derived from  lower management costs (single management, single board of directors) shared purchasing, and the IM noted none of the three can afford to invest in new bottling line, or plastic packing lines for soda, juices and water
Mt Kenya has 2011 sales of about $29 million, Rift Valley $21 million and Kisii $18 million, with Mt. Kenya and Rift both having after tax profits of ~$1.3 million. A nominal shareholding of 20,000 (1,000 shares of par 20)  in each, will be worth Kshs 80,000 (11,400 new shares) for Kisii Bottler shareholders, Kshs 526,000 (75,000 shares) for Mount Kenya Bottler and Kshs 112,000 (16,000 shares) for Rift Valley Bottler shareholders. The IM also dangles a carrot that, Almasi could one day be a listed company.
Haco boost?  – Tiger Brands which own 51% of Kenya’s Haco are now buying 63% of Dangote Flour Mills in Nigeria. Will Haco get a boost in the food business, exporting to Nigeria?
Kenol  Reassures – Kenol made a surprising (to many)  half year loss  due to foreign exchange hedging contracts. They subsequently issued a statement of reassurance that a planned majority sale to  Puma Energy was sill on, with the due diligence process yet to be completed. Unfortunately, it is likely that, once the deal is done, Puma will also buy out the other minority shareholders and de-list the company – which is a shame, as it was one of the most pro-active companies in shareholder communications