Category Archives: Centum

M&A Moment: BritAm, Centum, other East Africa deals

Britam and Centum have had a busy few weeks.
 
BritAmEA (i) Had an oversubscribed bond at the NSE that saw them raise Kshs 6 billion (ii) Completed the acquisition of 99% Real Insurance – giving them access to Mozambique, Malawi and Tanzania (the Competition Authority approved this deal with a caveat that they retain at least 85 of the 105 employees of Real) (iii) Established an office in Rwanda (IV) Britam will also pay about Kshs 2 billion for Equity’s 25% in Housing Finance.
 
Centum (i) Are proposing to acquire an additional 66% shares in K-Rep Bank (ii) Are seeking shareholder approval to create a Mauritius company, set up Kings Beverage, Bakki, Shefa subsidiaries, and also ratify the acquisition of 73% of Genesis & 30% of Broll (real estate) (iii) Ceded 42% of Two Rivers venture to investors at Kshs 6 billion, (iv) Are still in the running for Rea Vipingo offering Kshs 75 per share, over the Rea bid of Kshs 70 per share to other shareholders (v) Key Centum shareholder, Chris Kirubi said he wants to be a dollar billionaire. 
 
Other recent deals include
 
Airlines
  • Kenya Airways to give Tanzania’s Precision Air a $10 million bailout. 
  • Waiting to see who will officially be FastJet’s partner will be for their renewed push to enter the Kenyan aviation market.
  • Hong Kong-listed Frontier Services Group completed the acquisition of 49% of Phoenix Aviation for $14 million (Kshs.1.2 billion).
Autos
  • Al Futtaim Auto to compulsorily acquire the remaining 8.4% of CMC shares from minority shareholders
Banking & Finance
  • Actis to acquire Compuscan, the largest independent credit bureau in Africa & run it as Credit Service Holdings with Michael Jordaan as chair.
  • Diamond Trust has an ongoing rights issue to raise Kshs 3.2B ($42 million) from shareholders at Kshs 165 per share.
  • Ecobank got investment bank approval in Kenya following their buyout of Iroko buyout and will target oil & gas, infrastructure & commodity deals. 
  • KCB is now a holding company, and is said to be interested in buying an insurance entity.
  • (edit) Kenyan Women Holdings will sell 25% of the shareholding of Kenya Women’s Finance Trust to their 600,000 members between September and October 2014. 
  • NIC Bank to have a corporate bond and rights issue during 2014
  • Atlas Mara to buy 77% of Development Bank of Rwanda 
  • National Bank shareholders to vote on if money from their upcoming rights issue can go to pay off preference shareholders
  • Western Kenya politicians have supported the creation of a new Mulembe Investment MFI bank, that will be part-funded by counties to serve 5 million people. 
Building & Cement
  • Holcim is set to acquire effective control of Kenya’s Bamburi Cement as part of the planned merger between Holcim and Lafarge. “The parties do not wish to see any change to the status of Bamburi as one of Kenya’s leading industrial companies listed on the NSE.”
Food & Beverage 
  • Danone bought 40%of Kenya’s dairy processing company Brookside which had revenue of Kshs15.4 billion (€130 million) in 2013. It was previously 90% owned by the Kenyatta family with Abraaj owning 10%. Brookside collects milk from 140,000 farmers and has 3,000 employees.
  • Distell of Stellenbosch South Africa got privatization approval from the Kenya government to acquire of 26% of KWA Holdings E.A. that was previously owned by ICDC  for Kshs 860 million (about $10 million)
  • Kenya Wines will also their Kshs126 millionUchumi Supermarket stake.
  • See Centum (above)
  • South African food company, Tiger Brands has dropped plans to acquire Kenya firms Rafiki Millers for $25m.
Health & Beauty
  • Procter & Gamble merged India, the Middle East and Africa into one IMEA region to improve execution.
Hotels & Tourism
  • The Kenya Competition Authority approved the acquisition of 100% of Fairview Hotel by City Lodge Hotels.
  • Kempinski Hotels, Europe’s oldest luxury hotel group has officially taken over Hôtel Des Milles Collines in Rwanda.
Insurance 

  • See Britam above
  • CIC had dropped plans for a rights issue in favour of a corporate bond
  • Liberty Kenya proposed to pay a Kshs 1/= scrip dividend, but shareholders can opt for cash.  
  • UAP had an oversubscribed bond that raised Kshs 3.1 billion against a target of 2B. 
  • Africa Report magazine listed insurance companies as the top performers at the NSE in 2014 (see table).
Legal
  • Kenyan firms Hamilton Harrison & Matthews (HHM) and Oraro & Company have announced they are to merge pending regulatory approvals.
Media & Communications
#RIPCareyEaton
  • The $35 billion Publicis-Omnicom merger fell apart. The deal to combine the world’s largest advertising company was foiled by myriad difficulties, including who would run the new firm. The collapse of the deal is a win for WPP CEO Martin Sorrell, who campaigned aggressively against the merger of two of his biggest rivals.
  • A few months after his big deal with One Africa Media consolidating operations in Kenya, Uganda and South Africa, co-founder, Carey Eaton, was killed in Nairobi. See some tributes to Carey Eaton. The Economist also ranked the largest internet companies in Africa and One Africa Media topped this at $80 million, followed by Mobile Planet ($15 million) and Kopo Kopo ($10 million) 
  • passed away – some tributes 
  • Scangroup agreed to acquire a majority stake in a pan-African firm – the Experiential Marketing Group (EXP) 
  • The  Safaricom and Airtel buy out of (and split of) Yu appears to have stalled. 
Oil & Mining
  • In the last year, Tullow Oil and Base Resources have paid the Kenya government $22 million and $16 million respectively. 
  • Tullow received a  judgment in its favour over capital gains tax payments that Tullow had made onHeritage’s behalf to the Uganda Revenue Authority. In August 2013, Tullow received $345.8 million from Heritage in satisfaction of this High Court judgment.
  • Swala Oil & Gas completed their Tanzania IPO which was oversubscribed and will now proceed to list on the Dar es Salaam Stock Exchange (“DSE”). The placement of 13.3 million shares with 1,869 new and existing shareholders also allowed Swala to keep excess funds from Dar IPO.
Transportation & Utilities
  • Transcentury sold their 34% in Rift Valley Railways to Citadel Capital for $43.7M recovering their cash, but below fair value..they cited the delayed turnaround of the railway consortium as a reason for the sale.
  • Actis confirmed the sale of its stake in Umeme for $85.5 million to 20 institutional investors including Investec and Uganda’s NSSF
  • Kone Kenya acquired the business of Marryat & Scott, an elevator installation company.
Other Peoples Money
  • The Australian Navy seized heroin worth $296 million from a wooden boat off  the Kenyan coast.
  • The Karen Blixen house was put up for sale for $9.5 million 
  • Kenya’s NSSF had $600 million (Kshs 51 billion) in quoted securities as at June 2013 topped by Bamburi EABL and KCB.
  • The Competition Authority fined Tusker Mattresses (Tuskys) and Ukwala supermarkets Kshs 5.3 million while allowing them to continue pursuing a supermarket consolidation deal.

Countdown to REIT’s in Kenya

This week CFCLIfe and Stanlib managers held a media briefing on Real Estate Investment Trusts (REIT’s) in Kenya and their possible impact on the local property scene.  REIT’s are common around the world, South Africa, Ghana, Nigeria have had legislation for them, and finally, there’s a Kenya law on REIT’s in place (July 2013) after many years of formulation and review.

 Stanlib Kenya  plan to launch REIT’s in Kenya in September 2014 – and the law allows for two kinds – Income REIT’s (I-REIT) and Development REIT’s (D-REIT). Some unique features about REIT’s (which will cost between Kshs 100 – 300 million to set up with a minimum of 7 promoters) include they must distribute about 80% of profits to investors, and investors can sign on to I-REIT’s for as low as Kshs 5,000.

The speakers noted that many large landlords in Kenya are quite comfortable earning incomes of less than 5% on their assets, when they could be earning quite a bit more (10% – 20%) by signing up with REIT’s – which are tax-exempt and offer diversification (can invest in strong properties prisons, hospitals, malls) with more liquidity for all investors who participate in the REIT. While there’s saturation as the high end of the property market, and expensive land prices are still climbing,  there are still great opportunities at the mid- and lower- residential and commercial income segments. Also,  the Kenya UN classification was upgraded which means that from a previous 45, over 180 countries will now have officials accredited to the UN living in Nairobi. 

Also licensed as REIT managers alongside Stanlib in April, were CIC Assets and Fusion Investments.

Answers to ColdTusker’s questions

  • The minimum amount of initial assets for a D-Reit is 100M and for a I-Reit is Kshs 300M
  • D-REIT in the act is defined as “a development and construction real estate investment trust” is for sophisticated investors e.g for property developers to put up properties. They have shorter lifespans – and YES they can convert to I-Reit’s which are for income from established properties. D-Reit’s can borrow up to 50% of assets, and i-Reit’s only 35%, also i-Reit’s must have 75% of portfolio in properties, and D-Reits have to have sunk 30% of their funds into property within year 1 
  • Centum 2 Rivers was mentioned as the planned largest mall in Eastern Africa – with Carrefour as an anchor along with other foreign shops as main tenants (not the usual local supermarket and shops in the stores)..interesting as Carrefour seems to be withdrawing from emerging markets –  http://qz.com/231405/carrefours-india-exit-has-little-to-do-with-the-governments-reservations-on-retail/

Shares Portfolio February 2014

Compared to last quarter, the portfolio is up 0.13% while the NSE 20 share index is down by 5.25% since  November 2013.
The Stable
Barclays ↓
Bralirwa (Rwanda) ↓
Centum  (ICDCI) ↑
Diamond Trust ↑
East African Portland Cement ↓
Equity Bank ↓
KCB ↓
Kenya Airways  ↓
Kenya Oil ↓
Safaricom ↑
Scangroup ↓
Stanbic (Uganda) ↑
Unga ↑
Changes
In: None
Out: None
Increase: Kenya Airways
Decrease: Diamond Trust
Best performer: Centum (up 22% this quarter), then Diamond Trust (14%), Safaricom 6% 
Worst performer: Scangroup (down 15% this quarter), then Kenya Airways  (-14%), KCB (-10%)
Looking Forward To 
– Bank profits & dividends, though it’s going to be a rough year 
– Diamond Trust rights issue.
– More M&A deals that involve listed companies like Centum.
– The downward trend echoes back to 5 years ago  when every share was down, and Diamond Trust was the best performer by only losing 8%. Since then, it is up 229%. 

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.

Actis buys 36% of AutoXpress, East Africa’s leading tyre distributor, with 20 stores in Kenya and Rwanda.

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).

Kenya’s  competition authority  has approved the acquisition of 73.35% of Genesis Kenya by Centum Investments.

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. 

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

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.

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  after Fairview 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

British 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 

Precision Air  of Tanzania seeks a bailout from Kenya Airways? 

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 

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).

Jobs: Rwanda’s Agaciro Development Fund is seeking an investment office. Deadline is Feb 14.

2013 Final Kenyan M&A: Brookside, Fina, Vipingo

Recent deals completed approved by the Competition of Authority of Kenya include
Banking
– The acquisition of 70% of Fina Bank (Kenya) by Guaranty Trust Bank (Nigeria).  The resulting Institution shall be called Guaranty Trust Bank Kenya Limited.
–  The acquisition of the voting & veto rights of ETC Group (Mauritius) by Standard CharteredPrivate Equity Mauritius, Prif Afrivest, and CSSAF

Food
The acquisition of all business and assets of Buzeki Dairy by Brookside Dairy

Exceptions
The Competition Authority excluded the acquisition of the mobile money agency business of PEP Intermediaries from the provisions of the Competition Act as the merger would not affect competition negatively and the combined turnover of merging entities of  KSh. 600 million ($7 million) was below the required merger threshold for mandatory notification.

The Authority also excluded the acquisition of the 55% of participating interest in Block 2B in Kenya by Premier Oil Investments from Lion Petroleum from the provisions of the Competition Act as the transaction entities fall under an excluded sector  and the merger would not affect competition negatively.
Others Transfers
The public transport business of  Wuthering Heights Travels, in Githunguri, has been sold and transferred to Da Bridge Logistics Company. 
Other Deal Making

The year ended with a still unresolved three0way battle for Rea Vipingo which is listed at the Nairobi Stock Exchange and was trading at about Kshs 28 ($0.32) per share.

– First was an offer by the REA Trading a UK group comprising the largest shareholders in the company buy out the minority shareholders at Kshs 40 per share and delist the company. –  A few days later there was a counter-bid by Centum Investments who offered to buy out other shareholders at Kshs 50 per share and have Vipingo remain listed at the NSE 
– Then there was a third offer for the company, this one by Bid Investments – offering Kshs 55 per share, and also with a declared intent to leave the company listed at the NSE. 
The attraction of Vipingo appears to be its land holdings, and a trend of delisting of companies at the Nairobi Securities Exchange remains a sore point with minority shareholders of companies – and the may tip the balance of offers,
The Unquiet African blog has more on the Vipingo battle, and also speculates on future M&A deals at companies like Airtel, Safaricom, Wananchi and Kenya Railways.