Category Archives: M&A

Rubis Kenol Deal Details

The Directors of Kenol Kobil have recommended that their shareholders accept a buyout offer from Rubis Energie as more details have been availed about the deal.

Kenol is second largest in the country of 60 oil marketers. It has 13% market share boosted by 47% share in civil aviation. In retail, they have a 10% share behind Vivo/Shell and Total. Rubis is listed on the Paris Euronext Exchange. It has grown in 15 years by acquiring and managing companies and all its individual businesses are now profitable. SBG Securities have confirmed that Rubis have enough funds for the takeover.

Deal Excerpts

Special Shareholders

  • The offer is a 50% premium price and it is billed as offering shareholders a 100% cash return without broker charges.
  • Rubis owns just under 24% of Kenol that it bought from Wells, on October 2018 at Kshs 15.3 per share. If it takes over the company before October 2019, it will pay Wells an equivalent of the difference that other shareholders are receiving over and above what Wells received.
  • If Kenol announces any dividend now, an amount equivalent of the dividend shall be deducted from the amount due to be paid to any shareholder.
  • Kenol shareholders can only accept the offer in full, not partially. Kenol can vary its offer up to 5 days before the closing date and any shareholder who had accepted will be deemed to have accepted the new terms.
  • Rubis has received irrevocable undertakings from Tasmin Ltd with 4.2% and CEO David Ohana with 5.7% comprising 88 million shares he was granted in an ESOP in January 2017.

Way Forward:  

  • The offer closes Feb 18, 2019, with results announced on March 12.
  • Rubis reserves the right to extend the offer, with the approval of the CMA, but not beyond July 30, 2019. 
  • Shareholders, local and foreign, individual and corporate have been invited to register their interest in accepting the offer electronically on Rubis site  – this takes care of an issue cited in the stalled Victus-Unga buyout in which no response was received from 8% of their shareholder), as either they did not receive their documents through their post office mailboxes in time or did not respond, perhaps because they hoped that a better offer for their Unga shares would materialize.
  • If Rubis attains 90% support, they will force other shareholders to accept, and move on with delisting. If they gain 75% support but fall short of 90%, they may seek shareholder and regulatory approval to delist. Rubis will vote in favour of that and, if 75% approve and not more than 10% oppose it, they will proceed to delist Kenol. If it does not delist, it will remain listed until approvals are obtained or CMA asks the NSE to delist the shares. They caution that if Kenol is not delisted, after the conclusion of this deal, the remaining shareholders will find that the liquidity of their shares will go down, – noting that less than 0.06% shares traded each in a six month period prior to the deal announcement.

Nigerian Banks – Diamond and Access to merge

After weeks of speculation, Diamond and Access Banks announced a merger to create the largest bank in Nigeria.

It was reported that the Diamond Bank spurned offers to inject critical capital from US private equity firm, Carlyle that was a key shareholder in the bank and sought other deals, and the statement points to a competitive process out of which Diamond selected Access Bank.

According to an FT report, the deal values Diamond at just over $200 million and would create Nigeria’s biggest bank by both deposits and assets and that the merged entities would have 650 branches and 6,800 that would see some savings through redundancies.

Access will acquire Diamond through a combination of cash and shares with Diamond shareholders receiving Naira 3.13 per share, comprising N1.00 per share in cash and the allotment of 2 new Access Bank ordinary shares for every 7 Diamond Bank ordinary shares held.

The merger will result in the end of Diamond Bank with listings of its shares cancelled at the Nigeria Stock Exchange and the London Stock Exchange when the merger is completed in the first half of 2019. Access is listed in Nigeria, while Diamond was also caught up in the Nigeria vs. MTN forex case.

The Banker Magazine ranked five Nigerian banks among 1,000 top global banks with Zenith, Guaranty Trust, FirstBank, Access Bank and United Bank for Africa featuring. Another ranking of the top banks in Nigeria in 2017 listed Nigeria Zenith, Guaranty Trust, First Bank of Nigeria, Ecobank Nigeria, Access Bank, United Bank for Africa, Diamond Bank, Union Bank of Nigeria, and Fidelity Bank. The banks with a presence in Kenya are Guaranty Trust Bank (GTBank), Ecobank and United Bank for Africa (UBA).

edit March 2019 Approvals: The merger decision was approved by 98% of Access Bank shareholders, while at Diamond Bank it got 100% (99.98%) approval. Also, the Central Bank of Nigeria and the Securities and Exchange Commission have approved for the combined businesses to start business on April 1, 2019, as a Pan-African bank operating in 12 countries, 3 continents. The combined banks (Access had 11.8% market share and Diamond 4%) will have 15.9% making it largest Nigerian bank ahead of Zenith (14.6%), FBN (13.9%) and UBA (11.7%)

Digital banking: The new bank has been hailed by the deal backers as creating Africa biggest retail bank by customer base (29 million) with 677 branches, and 3,100 ATM’s. On the digital side, Access had 3 million customers compared to Diamond’s 10 million online banking customers and Access will incorporate elements of Diamond’s banking services such as XclusivePlus, DiamondXtra and Pay Day loans. 

No new capital: Post-deal ownership of the bank will comprise 81% Access shareholders and 19% Diamond shareholders. Access was expecting to proceed to raise Naira 75 billion ($207 million) of capital and had got approval for a rights issue to happen in the first half of 2019, but they will no longer pursue this avenue as they have identified 150 billion Naira in revenue and cost synergies to be tapped over the next three years.

Rubis Énergie to takeover Kenol Kobil

A day after a huge block of shares of Kenol Kobil, exchanged hands on the Nairobi Securities Exchange (NSE), came an announcement that Rubis Énergie intended to buy out all the remaining shares and delist the company.

Rubis had acquired 24.99% of Kenol from Wells Petroleum, at Kshs 15.30 per share on October 23, in a deal that was the highlight of the day at the NSE. The offer to other shareholders of Kenol, to buy the shares at Kshs 23 per share, a 53% premium, values the oil market leader in Kenya and the East Africa region, with 350 retail outlets, at Kshs 36 billion ($353 million).

Making the announcement in Nairobi was the Rubis Energie  CEO Christian Cochet and CFO Bruno Krief. French company Rubis operates over 50 subsidiaries and its downstream business had 2017 sales revenues of Euros 2.7 billion and net income of Euros 187 million while its midstream business has sales of Euros 895 million and net income of Euros 53 million. It is a subsidiary of Rubis SCA Group which is listed on the Euronext Paris stock exchange.

The company which operates in Southern Africa, Western Africa, North Africa and islands off the continent, intends to appoint a majority of the board of directors and use Kenol to extend its reach in East Africa as a part of Rubis operations and development strategy through acquisitions which may mean lower dividend payments. 

If the deals succeeds, they will pay Wells an amount equal to the difference in the price they paid on October 23 and what other Kenol shareholders will get. Rubis intends to acquire the other 75% of the company in addition to new shares from Kenol CEO David Ohana who has already undertaken to sell the shares which were granted to him through the Kenol ESOP to Rubis. Once they get the approval of 90% of Kenol shareholders, they intend to delist the company and will move to trigger this once they get to over 75% of shares. The transaction advisors are Stanbic Bank Kenya and SBG Securities who also double up as the sponsoring broker and lead acceptance agent.

However, a few hours after receiving a notice about the Rubis cash offer for Kenol, Kenya’s Capital Markets Authority announced that it was launching an investigation into suspicious trades in relation to the takeover transaction and asked Kenya’s Central Depository and Settlement Corporation to place a freeze on the suspected accounts.

The Rubis deal comes a few years after Kenol tried to engineer a majority sale to Puma Energy and Kenol is also in the process of acquiring fuel stations in Rwanda land Uganda in two separate deals.

Excerpts from the 2016 Kenol AGM of shareholders.

Ethiopia privatization window opens

Several weeks of rapid news has seen Ethiopia privatization of state enterprises proposed as one of several changes to sustain what has been one of Africa’s fastest-growing economies. This all comes in the wake of a new era under Ethiopia’s new prime minister, Dr. Abiy Ahmed Ali, who is leading change within the country and outside, such as on his recent visit to Kenya.

In the last few days the Ethiopian government has lifted a state of emergency, signaled an effective cease-fire with Eritrea, released long-jailed political prisoners, reshuffled security leaders, launched e-visa’s for all international arrivals with a view to dropping visa requirements for all other African nationals, and opened the Menelik palace to tourists among other changes, which have drawn comparisons or Abiy to Mikhail Gorbachev in Russia in the 1980’s.

The surprise was statements about plans for the massive Ethiopia privatization program in which the government would sell minority stakes in roads, logistics, shipping, and prime assets like Ethiopian Airlines, which just took delivery of its 100th aircraft, a Boeing 787, and which is the centrepiece of a logistical, tourism and business hub plan for the country. The program would also extend to two sectors that have been off-limits to foreign investors up to now;  banking and telecommunications.

For comparison, a 2012 list of Eastern Africa’s largest banks had the Commerical Bank of Ethiopia as the largest in the region followed by National Bank of Mauritius and KCB in Kenya, and at last measure (2017) had about  $17 billion of assets, 1,250 branches, and 16 million customers. And in telecommunications, Ethio Telecom, a government-owned monopoly has about 20 million customers in a country with a population of 107 million (many of them children), but still a low penetration rate. 

Ethiopia privatization of state enterprises is not a new item, but it is one which the government has put side as it pursued an industrialization model that has seen the building of new infrastructure, new factories, industrial parks, agro-processors, leather parks, vehicles manufacturers etc. but which has not been equally felt by the country’s large and young population – and this has seen wide-spread protests and a state of emergency that ushered in a new leadership with a new prime minister (Abiy). 

It also came after a lengthy story in the FT – Financial Times on the state of Ethiopia’s economy which cited the fatigue that China has with large investments and some projects that are operating below capacity coupled with the high government debt and shortage of foreign currency  – Two investors said that Sinosure, China’s main state-owned export and credit insurance company, was no longer extending credit insurance to Chinese banks for projects in Ethiopia as willingly as it used to. It notes that imports into the country are four times that of exports from  Ethiopia leading to the shortage of foreign currency.

The changes in Ethiopia could also be a warning to other African counties that have been moulded in a similar way to Ethiopia model, with heavy borrowing from China and building infrastructure and mega-projects for the future.  When the Ethiopia privatization program starts it’s unclear who will benefit and if Chinese companies will be given priority given that they have invested for a long period in Ethiopia compared to other new companies, such as Vodacom and MTN, who are excited about the prospects that are now opening up

Unga Seaboard Deal Details

EDIT July 27: Seaboard announced they are waiving the minimum acceptance threshold and will proceed to complete the acquisition of shares for which acceptances had been received  and those shareholders will be paid Kshs 40 per share in cash. Seaboard still intends to seek a de-listing of Unga from the NSE and will convene an extraordinary general meeting “in due course”.

EDIT July 20: Official results of the offer, saw Seaboard increase its shareholding from 2.92% to 18.97%, and combined with the 50.93% of Victus, they now control 69.9% of Unga’s shareholding. Other shareholders own 30.1% but 8.16% of them did not respond to the offer and Seaboard who had a target to attain 75% in order to push for a de-listing of Unga from the Nairobi Securities Exchange will make further announcements.

EDIT June 14: Seaboard Corporation has received regulatory approval from the Capital Markets Authority (CMA) to extend its offer to buy the minority shares in Unga Plc by another 10 days.. to 5.00pm, Thursday 28th June. “During the offer period, Seaboard received numerous queries from Unga Plc shareholders with requests for resubmission of the offer documents that were originally dispatched to them via post by the Registrars. This is primarily attributed to the change in postal addresses and/or relocation of shareholders whose new details are not updated with the Central Depository and Settlement Corporation”.

May 30: Today sees the start of an offer period by Seaboard Corporation, acting in conjunction with Victus Limited, to buy out other shareholders of Unga Group PLC and to de-list the company from the Nairobi Securities Exchange.

From reading the various offer documents relating to the Seaboard proposal that includes the public notice, circular to Unga  UGL) shareholders, offer terms, and a public FAQ…

  • Seaboard: The company which states it is on the Fortune 500 list, was incorporated in 1908,  and is registered in Delaware and headquartered in Kansas. It had $5.8 billion revenue and $427 million profit in 2017 and is involved in marine, pork, commodity trading and milling (where Unga is), sugar and power industries. Seaboard owns 2.92% of Unga and also 35% of Unga Holdings, a subsidiary of Unga (who own the other 65%) and which comprises the flour milling and animal feed operations of Unga. Seaboard is joined in the Unga buyout deal by Victus which owns 50.93% of Unga shares.
  • Delisting:  the memorandum notes that: “It is Seaboard’s intention that UGL retains its position as the preferred our producer in Kenya… ( but that ) as a publicly listed entity, UGL is disadvantaged because this status requires public disclosure of otherwise confidential business information relating to its business strategies … (also that) in addition, the present public structure makes it difficult to attract additional strategic investors.

  • Offer Price: Over the last year, Unga’s shares have traded at between Kshs 30 and Kshs 32 and they briefly rose to Kshs 60 after the offer was announced in February but are now settled at ~Kshs 42 per share. Contained in the documents to shareholders, CBA Capital confirms that Seaboard has enough funds at Citi (bank) to complete the offer and to pay all shareholders in full at the offered price – which will amount to a cash payment of Kshs 1.4 billion (~ $14 million). Payments will be by M-pesa, cheque, or bank RTGS/EFT (for amounts over Kshs 1 million). 
  • From publicly listed to privately held:  Their target is to get 90% acceptance, but if they get 75% they may push on with the plan toward delisting, as they caution that any shareholders who hold out and don’t sell their shares, may find it harder to trade them in future. The offer to Unga shareholders opens 30 May and runs through to 13 June, after which the shares will be suspended till the end of June, ahead of a results announcement on July 2.
  • Firm Price? They have reached out to other large shareholders in Unga who own about 15% of the company shares. June 6 is the final day for Seaboard to vary the offer and if they do so all shareholders will benefit from the new price. But already there is a report that they have ruled out increasing their bid, saying they will be no change to the offered price unless a competing bid arises. Of note is that one of the large investors at Unga is a company which emerged to mount one of the competing bids at Rea Vipingo that resulted in the initial buyout promoter raising their eventual payment to Vipingo shareholders.
  • Board recommendation: The offer documents value the shares using the income approach at Kshs 39.82 per share, at  Kshs 39.01 using the market approach and at Kshs 62.04 using the asset approach. Seaboard is offering Kshs 40 and the members of the Unga board not linked with the promoters (3 of the 8 directors recused themselves) have recommended that Unga shareholders accept this price which is based on independence advice from Faida Investment Bank.
  • Transaction Advisors: Besides CBA Capital which are the fiscal advisors and sponsoring stockbrokers, CBA is the paying bank, while other local firms in the Seaboard deal are Kaplan & Stratton (legal advisors), Oxygene for public relations and CRS are still the share registrars. The promoters hope to conclude the deal by September 30.