Category Archives: AGM

Scangroup plans online EGM

WPP Scangroup will hold a unique extraordinary general meeting to obtain shareholder approval to complete the sale of one of its subsidiaries. 

The deal comprises the sale of its Kantar business, which includes 80% of Research & Marketing Group Investments, 100% of Millward Brown East Africa and its shareholding (through Scangroup Mauritius) in Millward Brown Nigeria and Millward Brown West Africa (with interests in Cameroon, Cote d’Ivoire, Ghana, Senegal and the United Kingdom). The buyer is Kantar Square Two, which is owned by Bain Capital.

Earlier this month Kenya’s Capital Markets Authority (CMA) authorized listed firms to publish their results online, pay out dividends and appoint auditors without summoning shareholders – and have these decisions ratified the next time that shareholders meet at an annual general meeting. 

However, a listed company is still required to obtain shareholder approval before selling shares in a subsidiary that results in it ceasing to be a part of the company. WPP Scangroup’s CEO Bharat Thakar then sought court approval to hold a virtual meeting of shareholders to conclude the deal.

The Court ruled that Scangroup could go ahead as long as the CMA’s rules on adequately sharing information with shareholders, processing their feedback, questions and voting are facilitated, understand and observed.

This is a first-of-its-kind session but expect more companies to try this as May and June are when most annual general meeting’s (AGM) are held.

EGM Details: Registration is now open, for shareholders to be able to vote at the May 27 extraordinary general meeting (EGM) of Scangroup by sending in their proxies, up through May 25. Shareholders are to register using their phones, and after verification, they will get access to transaction documents. They can email or send in questions, for clarification, that Scangroup will compile and share its responses with all shareholders before the May 27 meeting which shareholders will watch via a live stream. Results of the shareholder vote will be published within 24 hours.

Deal Size: The amount due to be paid to WPP Scangroup is $49.7 million, plus a $3.3 million share of the 2019 profit, that will result in a total deal amount valued at about $53.1 million (~Ksh 5.7 billion). 

Shareholder Bonus: It is expected that about 40% of the Kantar sale gains will come back to shareholders in the form of a special dividend.

Impact of the Deal: The sale will result in a one-off gain for WPP Scangroup in 2020 and a reduction of revenue from 2021. The discontinued operations accounted for Kshs 3.3 billion (26%) of Scangroup’s Kshs 12.5 billion revenue as well as 65% of its Kshs 835 million pre-tax profit in 2019. The deal will also remove Kshs 4.1 billion of assets, held for sale at the end of 2019, from Scangroup’s balance sheet going forward.

Deal Background: From 2018, WPP sought a buyer for Kantar through Goldman Sachs, Ardea Partners, Lazard Freres and Bank of America/Merrill Lynch. This resulted in bids from four private equity firms, and in July 2019, WPP agreed to sell 60% of Kantar to Bain Capital. WPP, which had an option to buy the business, will instead remain a 40% shareholder in, and do business with, Kantar. 

Deadlines: The valuation was arrived at before the global extent of the coronavirus outbreak was known, and the November 2019 deal has a long stop date of June 30, 2020

Deal Advisors: Anjarwalla & Khanna (legal) and Dyer & Blair Investment Bank (valuation). Three independent, non-executive, directors of Scangroup, Patricia Ithau, Richard Omwela and Pratul Shah, oversaw the transaction details on behalf of shareholders. 

Edits: (May 29)

  • Final Results of the vote, that had been audited by PwC were published on the Scangroup website early on Friday May 29. They showed that 88% of the registered owners had participated and had voted 99.98% in favor of the Kantar deal.
  • Here is a video stream of the EGM
  • Here are the questions posed by shareholders ahead of the meeting and responses from Scangroup.

$1 = Kshs 107.

NIC Bank shareholders approve merger with CBA at the 2019 AGM

NIC Bank shareholders met for their 2019 annual general meeting and approved a merger with CBA bank, creating Kenya’s second-largest bank (by customer deposits), a day after CBA shareholders had approved the same deal.

The merged bank will have about a 10% share of banking assets, deposits, and loans in Kenya. It will encompass the two groups serving over 41 million customers and their banking entities in Kenya, insurance (CBA Insurance and NIC Insurance), investment banking & stockbroking (CBA Capital, NIC Capital, NIC Securities), and regional subsidiaries in Tanzania (both banks), Uganda, (both banks) and Rwanda (CBA) and Côte d’Ivoire where MoMoKash is a CBA partnership with MTN and Bridge Group.

Group Managing Director John Gachora said scale is important in banking and that by merging NIC, which is known for asset finance and corporate banking, with CBA, which has desirable mobile banking and high net worth businesses, they would be the largest bank by customer numbers in Africa. CBA will be 53% shareholders in the merged bank.

NIC turns 60 this year, and in 2019, their focus will be on getting to Tier I ranking through the merger, and getting regulatory approvals after they had obtained shareholder approvals.  Directors also got approval to effect a name change (already under consideration) and the right to dispose of up to 10% of the assets of the bank without reverting back to shareholders. They will also create an employee share option program (ESOP) to retain key staff, and CBA, who already have an ESOP for their veteran staff (that owns 2.5% of that bank), will fold itself into the new incentive scheme. Other conditions of the merger include obtaining a waiver of capital gains and stamp duty tax in Kenya, approval of regulators in different countries, and approval of landlords and financial partners.

EDIT In May 2019, The Competition Authority of Kenya approved the merger of NIC and CBA banks on condition that none of the 1,872 employees of the merged entity are declared redundant for 12 months after completion of the transaction.

Karuturi AGM 2018

As workers of the former Karuturi flower farm in Naivasha, Kenya, await the outcome of a new appeal of the long-running court case and receivership, the Karuturi Group held an AGM in India and passed new resolutions to turn round the company.

The Bombay Stock Exchange-listed Karuturi, the world’s largest producer of cut roses, had published an annual report ahead of the AGM. According to the notice and results of the AGM, the Group proposed to increase the authorized share capital of the company to meet their long-term capital requirements.

Karuturi also plans to allocate convertible warrants to new shareholders who are; IBelive Fitness Solutions who may end with 10% if they exercise all options, Eye-3 Info Media who may end with 8% and Srinivasa Retail who will end with 14.3%. Prior to the AGM, the three had no shares in the company while the promoters of Karuturi had 25% and other public shareholders had 75%, including Deutsche Bank with 5%.

Shareholders also voted to appoint Messrs K G Rao and Co as auditors of the company and the notes showed that the previous year’s figures had not been audited by the current year auditors who had then provided a qualified opinion due to non-filing of some tax returns by the holding company. Another resolution was to ratify the appointment of the daughter of the Chairman and MD Sai Rama Karuturi, who had joined the board in September 2017. The resolutions were all passed.

The company has primary borrowings with Axis Bank in India (third largest private bank in the country), ICICI Bank of India, Axis Dubai, and smaller borrowings at the Commercial Bank of Ethiopia, Zemen Bank and Lion Bank in Ethiopia.

The accounts provided an (incorrect) link to the long-running Kenya bank case and receivership in Kenya. There are mentions in the notes that Karuturi Kenya was wound up by a court order of March 2016 and the company did not have any outstanding tax demands in Kenya or Ethiopia 

In a statement, the Board Chairman wrote that the Kenya farm should soon be back in the company’s possession following workers’ protests to various government authorities and media attention fueled by Kenyans on Twitter. On Ethiopia, he welcomed the new leadership of Prime Minister Dr. Abiy Ahmed and mentioned that the company had withdrawn all cases against the government of Ethiopia, paid compensation to the workers, and entered new lease agreements with a view to resuming operations in mid-2019.

ARM sells Mavuno Fertilizer and non-cement business for $16M

As part of the continued restructuring since CDC invested in the company in 2016,  ARM Cement is selling its non-cement subsidiaries for $16 million to reduce the debt of the company and strengthen its position in its core cement business.

A shareholder’s extraordinary general meeting on January 22 is expected to green light the disposal of its industrial minerals business, fertilizer business (to Mavuno Fertilizer), its silicates business to ARM Energy and its mining business to ARM Minerals.

After the transactions, the companies will cease to be subsidiaries of ARM and be owned as:  

  • ARM Minerals and Chemicals (will be 100% owned by 100% by Mavuno fertilizers), which will be 51% owned by Omya (Schweiz) AG and 49% by Pinner Heights Kenya.
  • ARM Energy: will be 100% owned by Pinner Heights Kenya.

Pinner Heights is owned by a trust set up for the benefit of ARM’s long-time Managing Director and key man, Pradeep Paunrana who owns 11% of ARM Cement, and his immediate family. A leasing company Vaell has sought an injunction stop the transactions and repossess vehicles leased to ARM Cement, but ARM has objected in court as the assets are not part of the non-cement business being sold.  

Elsewhere, a UK firm Exotix has issued a warning on Kenya cement company valuations with the view that the listed cement companies are overvalued due to high prices of clinker, foreign exchange losses and exposure of Kenyan companies to cheaper imports unlike their peer companies in neighbouring countries. Exotix recommends price downgrades of Bamburi Cement (by 2% from the current share price of Kshs 180), ARM Cement (by 22% from Kshs 13) and East African Portland Cement Company (by 32% from Kshs 27).

$1 = Kshs 103.

Septuagenarians and Auditor Changes on Kenyan Boards

Last week brought news that Co-Operative Bank had a new Chairman – John Murugu, who has previously worked at Treasury and CBK, is to take over as chairman on October 1, 2017, replacing Stanley Muchiri who is retiring after attaining the mandatory age of 70. 

The age of seventy as a cap for directors to serve on corporate boards has been paid lip service, until recently. But this year has seen prominent septuagenarians (70+ years) exit from financial firm boards including Peter Munga as Chairman at Equity Bank Group, Francis Muthaura as Chairman of Britam Holdings and now Mr. Muchiri who joined the board of Cooperative in 1986 and became Chairman in 2002. There could even be one more at Centum Investments with regard to top shareholder and director, Dr. Chris Kirubi who is also a former Chairman of the firm.

Dr. Kirubi was re-elected to the board in 2015, but the Centum AGM next week, where three other directors – Dr. Jim McFie, Henry Njoroge, Imtiaz Khan, all retire from the board, has an oddly-worded resolution – “Director above the age of 70 Years”  Pursuant to paragraph 2.5.1 of the Code of Corporate Governance Practices for Issuers of Securities to the Public 2015, to approve the continuation in office as a Director by Dr. Christopher John Kirubi, who has attained the age of seventy (70) years, until he next comes up for retirement by rotation.

Section 2.5.1 of the Capital Markets Authority (CMA)  Code of Corporate Governance Practices for Issuers of Securities states that it is desirable for board members to retire at the age of seventy years. Other changes in the code which are now been enforced more strictly include:

  • The Board shall rotate independent auditors every six to nine years (this is now  happening at some banks that have had the same auditors for more than a decade),
  • Auditors now narrate in the annual report to shareholders on key audit matters they encountered the company.
  • The status of Independent directors shall be checked annually, and they must not be associated by way of being an advisor to the company, or having a relationship – business or personal, with major shareholders or have cross-directorships with other directors.
  • A director of a listed company (except a corporate director) shall not hold such position in more than three public listed companies at any one time.
  • Independent directors can’t serve for more than nine years.
  • That a comprehensive independent legal audit is carried out at least once every two years by a legal professional in good standing with the Law Society of Kenya.
  • The Chairperson must be non-executive and not involved in day-to-day running of the business ( e.g. there wide expectations that Michael Joseph would play such a role as Kenya Airways chairman).
  • Publication of director resignations in the newspaper.
  • More engagement with institutional investors and media.