Category Archives: Uchumi

Kenya Development Corporations Merged

July 2021 saw the announcement of the conclusion of merger plans for a Kenya Development Bank. In a gazette notice, the Government announced the creation of the Kenya Development Corporation in June 2021, which comprises the Industrial and Commercial Development Corporation (ICDC), the Tourism Finance Corporation (TFC) and IDB Capital (formerly known as the Industrial Development Bank).

Industrial & Commercial Development Corporation:

ICDC owns 89% of Development Bank of Kenya, 27% of East African Fisheries, 17% of Eveready Batteries, 18% of Funguo Investments, 20% of General Motors East Africa, 4% of IDB Capital, 46% of KWA Holdings (KWAL) 27% of Mountain Region Poultry, 28% of Sisibo Tea, 2% of Uchumi Supermarkets, 31% of Almasi Beverages, 20% of Aon Minet Insurance and 23% of Centum Investments. Through a defunct subsidiary also 5% of Panpaper Mills, and 100% of Kenatco Taxis and 100% of Kenatco Transport.

ICDC also owns Uchumi House and Finance House in Nairobi and plots in Mombasa, Eldama Ravine, Eldoret and Embu, with another next to Malindi airport.

Tourism Finance Corporation:

TFC has subsidiaries including the Bomas of Kenya, Kabarnet Hotel (98%), Sunset Hotel at Kisumu (95%). Also Kenya Safari Lodges (82%), Mt Elgon Lodge (73%), Buffalo Springs (41%), Golf Hotel at Kakamega (40%), Mountain Lodge at Nyeri (39%) as well as 9% of Mararal Lodge and 5% of the Ark. Also Kenya Hotel Properties i.e. Nairobi’s InterContinental Hotel (33%) and International Hotels Kenya i.e Nairobi’s Hilton Hotel (41%). It also owns 52% of African Tours & Hotels (in liquidation).

TFC, previously known as the Kenya Tourist Development Corporation, owns Utalii house, a building on Moi Avenue Nairobi and a plot on prime Nkrumah avenue in Mombasa

IDB Capital:

IDB owns 0.3% of Consolidated Bank, 0.9% of Nzoia Sugar and 0.3% of South Nyanza Sugar Company (Sony) and a sliver of the Africa Export-Import Bank (AfrExIm)

Other:

All assets, securities and systems of the three institutions are now vested in the new corporation.

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, some of which were later appealed.

The 27 cases cover ten years, and most involve dealings at Uchumi while others revolve around executives and directors of CMC, commercial banks, and a handful of 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.

M&A Moment: July 2017

Various recent deals in the last few weeks and months in East Africa – compared to 2016 and 2015

Banking and Finance: Finance, Law, & Insurance

  • Commercial Bank of Africa (Kenya) is acquiring 100% of Crane Bank Rwanda from DFCU of Uganda
  • Direct Pay Online Group acquired 100% of Virtual Card Service in Botswana and Namibia. This will be followed by the acquisition of 100% of VCS business in South Africa (via Balancing Act Africa)
  • Chase Bank suitors announced by the Business Daily – are led by Societe General, and State Bank of Mauritius (who have also just completed the acquisition of Fidelity Bank)
  • Barclays PLC sold 22% of Barclays Africa
  • KCB was linked to another bid for NBK, although the CMA denied any knowledge of such a deal.
  • Kuramo Capital, the largest shareholder of Transcentury is acquiring 25% of Sterling Capital stockbrokers, the second largest bond trader in the country
  • Diamond Trust to acquire Habib Bank Kenya for shares worth Kshs 1.82 billion (~$18 million). EDIT At the end of July, the Competition Authority approved the deal on condition that Diamond Trust retains at least 41 employees of Habib Bank post-transaction and the Central Bank communicated that the deal would be concluded on 1st August when Habib would cease to exist as a licensed bank.
  • The Competition Authority of Kenya has authorized the proposed acquisition of a minority stake of 10.68% of I&M Holdings by CDC Group PLC together with certain veto rights.
  • I&M Holdings also has announced the successful completion of a merger with Giro Commercial Bank
  • Carlyle to acquire Global Credit Rating Co. (South Africa)
  • Letshego Holdings Limited (Botswana) acquires afb Ghana
  • Atlas Mara to acquire 13.4% equity in United Bank Nigeria, from Clermont Group for $55 million, increasing its stake to 44.5%
  • Sanlam Group has completed the acquisition of a majority stake in PineBridge Investments East Africa Limited. PIEAL is a leading asset management company in East Africa with operations in Kenya and Uganda – and the competition authority approved this at the end of July.
  • EDIT Alexander Forbes Kenya to change name & brand (to Zamara) after a change of shareholding to comply with new pension law that caps foreign ownership to a maximum of 40%.

Beauty & Pharma/Chem

  • The Competition Authority of Kenya authorized the acquisition of Dan Pharmacie by Mimosa Pharmacy.
  • The Competition Authority of Kenya authorized the acquisition of Sole Control of Syngenta AG (Syngenta) by China National Agrochemical Corporation (CNAC).
  • The Authority excludes the proposed acquisition of 72% of the issued share capital of Chemserve Cleaning Services Limited by Eye Level Exposure Limited from Part IV of the Act .. (their) combined turnover of KSh. 138,076,904 is below the required merger threshold for mandatory notification
  • Abraaj Group gets approval to acquire 75% of Healthlink Management (Nairobi Women’s hospital?)
  • The Competition Authority of Kenya has approved the proposed acquisition of 100% of the issued share capital of Monsanto Kenya by Bayer Aktiengesellschar/KWA Investment. Businessman Chris Kirubi revealed that he holds a 45% stake in agrochemical firm Bayer East Africa.
  • The Competition Authority of Kenya has authorized the proposed acquisition of the shares in the Dow Chemical Company by Dowdupont Inc. and the Competition Authority of Kenya has authorized the proposed acquisition of the shares in E. I. Du Pont De Numerous and Company by Dowdupont Inc.
  • A local drug store is set to be acquired for Sh. 2 billion. Imperial Health Sciences, which based along Mombasa Road will be acquired by South African investment firm Mara Delta Property Holdings. “The facility will be leased back to Imperial Health Sciences on a 10-year triple net basis, denominated in US$ and guaranteed by Imperial Holdings Limited.”
  • The Competition Authority of Kenya authorised the acquisition by Kibo Plastic Packaging of a minority (14.02%) shareholding with controlling interest in Blowpast Limited.
  • EDIT Japanese Kansai Plascon Africa has acquired local paint maker Sadolin for Kshs 10 billion.

Food & Beverage

  • Africa’s largest Coca-Cola bottler- Coca-Cola Beverages Africa Proprietary Limited (CCBA) has acquired Equator Bottlers, the third largest Coca-Cola bottler in Kenya. Equator Bottlers, was previously a subsidiary of Kretose Investments Limited owned by the Shah family, has been one of several authorized Coca-Cola Bottlers, which supply products in the Western regions of Kenya. It was established in 1966 and is based in Kisumu. EDIT  At the end of July, the Competition Authority authorized the deal on condition that the merged entity retains at least 2,279 employees post-transaction and that Coca Cola file a compliance report in two years.

  • The Abraaj Group is to acquire 100% of Java House Group from Emerging Capital Partners – the story was first broken at Wallace Kantai’s blog and the deal is said to be worth about $130 million. Java House Group was established in Nairobi in 1999. In 2012, Emerging Capital Partners acquired a majority stake in the Company, with the founder retaining a minority stake. ECP has helped Java House grow from 13 shops in Nairobi into East Africa’s largest casual dining brand, building an ‘eat-out’ culture. Today, it has an unrivalled regional footprint of 60 stores across 10 cities in Kenya, Uganda and Rwanda.
  • Catalyst Principal Partners has, through a newly established firm, Britania Foods Limited, acquired the business and operations of Jambo Biscuits Ltd, being a leading biscuits manufacturer in Kenya with its flagship “Britania” brand.
  • The Competition Authority of Kenya authorized the acquisition of assets of Wanainchi Marine Products (Kenya) by One Holdings.
  • The Competition Authority of Kenya authorized the acquisition of Sosco Fishing Industries by One Holdings.
  • Distell, Africa’s leading producer of spirits, wines, ciders and ready-to-drinks (RTDs) continues to ramp up its investment on the African continent, with the acquisition of a further 26.43% in KWA Holding East Africa Limited (KWAL), Kenya’s foremost spirits manufacturer and distributor, from Centum Investment Company Limited. The African liquor giant now owns a majority shareholding of 52.43% in KWAL, having previously acquired a 26% stake from Industrial and Commercial Development Corporation (ICDC) in 2014.
  • Netherlands-based private equity firm DOB Equity announced that in which in December 2016 that it had acquired a stake in Kenya’s Countryside Dairy, a Nyahururu-based facility with a processing capacity of 100,000 litres of milk per day.
  • Amethis and Metier to acquire East African FMCG firm, Kenafric Industries.. Two private equity funds have bought a 40% minority stake in Kenafric Industries as the firm eyes regional growth…popular products under the confectionery and culinary segments include Fresh brand of chewing gum and Oyo food additive. It also manufactures snacks and ready-to-drink juices at its plant in Nairobi’s Baba Dogo. The business, started 30 years ago by Velji Punja Shah and his four sons, is looking to increase its coverage of other East African countries, saying it currently sells 45% of its products outside Kenya.  
  • EDIT: The Competition Authority of Kenya has authorised the proposed acquisition of indirect control of Weetabix East Africa by Post Holdings through its wholly-owned subsidiary, Westminster Acquisition.
  • EDIT:  Twiga Foods, the Kenyan business-to-business food supply platform announced today that it has successfully raised a Series A funding round including $6.3 million in equity and $4 million in debt instruments.
    • The round was led by Wamda Capital and includes Omidyar Network, DOB Equity, Uqalo, 1776, Blue Haven Initiative, Alpha Mundi, and AHL.
    • Today, Twiga is the largest distributor of several basic food staples in Kenya, having sold over 55 million bananas alone and delivering over 4,000 orders a week.
    • Additional to the Series A round closing, Twiga closed some $2 million in grant funding from USAID, GSMA, and others to support bolt-on farmer services, financial inclusion, and first of their kind domestic food safety initiatives.

Hotels/Tourism

  • Simba Corporation acquired a 35% minority stake in Hemingways Holdings and plans to grow from its current three properties: the Olare Mara and Villa Rosa managed by world leading hoteliers, Kempinski, and Acacia Premier Kisumu, as Hemingways is the parent company of three iconic properties that represent the definitive portfolio of luxury travel in Kenya: Hemingways Watamu, Ol Seki Hemingways Mara and Hemingways Nairobi. The transaction also includes Express Travel Group, a subsidiary of Hemingways that provides comprehensive and high quality travel management services through its international franchise partnerships with American Express Global Business Travel and Europcar International as well as through Hemingways Expeditions, a premium Destination Management Company. EDIT: The competition authority approved the deal at the end of July.
  • The Competition Authority of Kenya authorized the proposed acquisition of control of Abercrombie & Kent Kenya (Abercrombie) by Yan Zhao Global, from A&K Cayman L.P and other minority shareholders
  • Thomas Cook India acquired Kuoni Travel specialists in 17 countries (includes Private Safaris E.A. in Kenya)
  • Accor Hotels will relaunch Tune hotel under the ibis Styles brand.
  • Older hotels – 680 and Boulevard, two older iconic Nairobi hotels have been recently bought by the Deputy President, William S. Ruto.

Logistics, Engineering, & Agri-Biz

  • Isuzu will become a 57.7% shareholder in Isuzu East Africa through the purchase of General Motors’ shareholding in the business. The other shareholders will remain as Kenya’s Industrial and Commercial Development Corporation (20%), Centum Investments (17.8%) and Itochu Corporation (4.5 %). EDIT: At the end of July, the Competition Authority of Kenya authorised the deal on condition that the merged entity absorbs all 383 GMEA employees, continues after-sales service of all the vehicle brands, Isuzu and Chevrolet sold and leased by GMEA for duration of all the after-sales service contracts, honours all existing dealership agreements between GMEA and its dealers, and communicates to all GMEA customers on the continuation of after-sales service.
  • The Competition Authority of Kenya authorized the proposed subscription for 24.99% shareholding in Trans-Century with 100% of the redeemable preference shares in TC Mauritius Holdings by Kuramo Africa Opportunity Kenyan Vehicle.
  • The Competition Authority of Kenya authorized the transfer of 50% of the issued shares in Safal Building Systems to Mabati Rolling Mills.
  • The Competition Authority of Kenya has authorized the proposed acquisition of 100% of Kenya Kazi by Gardaworld
  • Rift Valley Railways (RVR), the company that runs the century-old Kenya-Uganda railway, has moved to court in a last-minute effort to stop the concession manager, Kenya Railways Corporation (KRC), from terminating its 25-year contract.
  • The Competition Authority of Kenya has authorized the proposed acquisition of Reunert Limited of 75.39% of the ordinary shares in Metal Fabricators of Zambia PLC.
  • The Competition Authority of Kenya has authorized the proposed acquisition of 40.7% of the ordinary shares and control of ARM Cement Limited by CDC Africa Cement.
  • Crown Paints to buy back 15% of its stock, the first company to do this.. now allowed by Kenya’s new companies law.
  • EDIT Athi River Mining is selling its Mavuno Fertilizer subsidiary to Omya and Pinner Heights to focus on its cement business.

Oil/Energy

  • German-based solar electrification firm Mobisol has acquired pay-as-you-go off-grid (PAYG) solar industry software firm Lumeter.
  • Hass Petroleum sold a 40% stake to Oman Trading International to fund growth in Eastern Africa
  • Tullow Oil plc sold stakes in Uganda to Total Oil for $900M, and will retain 10% of that and of a $3.5 billion pipeline through Tanzania
  • Vitol Africa gets approval to acquire 19.91% of Vivo Energy from Shell Overseas Investments
  • The Competition Authority of Kenya has authorized the proposed acquisition of indirect control in Dalbit Petroleum by Humphrey Kariuki Ndegwa.
  • The Competition Authority of Kenya has authorized the proposed acquisition of the retail petroleum business of Hashi Energy by Lake Oil
  • The Competition Authority of Kenya has authorized the proposed acquisition of the retail petroleum business of Hashi Energy Limited by Lake Oil Limited
  • The Competition Authority of Kenya has authorized the proposed acquisition of 100% of Gulf African Petroleum Corporation by Total Outre-Mer S. A. on condition that Total Outre-Mer S. A. comply with the following hospitality and employment conditions— including All agreements remain in force with relation to the Mombasa Terminal; and the merging parties are limited in the termination of employees of Gulf African Petroleum.
  • PIC South Africa will take up all shares not taken up in the Kengen Kshs 4.4 billion on offer. The South African government employees pension giant with $133 billion of assets will take up 351.2 million new shares at Kshs 6.55 each (totaling Kshs 2.30 billion) as other shareholders get diluted by 5.33% each e.g. The Kenya Government which was a 74% shareholder before, will have 70% afterwards.

Real Estate & Supermarkets

  • The Competition Authority of Kenya authorized the proposed joint venture between Helios Investment Partners and certain shareholders of Acorn Group.
  • Cytonn Investments Management (Kenya) to acquire a $10 million stake in Superior Homes.
  • Konza Tech City is seeking investors to apply for land to build campuses, BPO’s, offices, hotels, and student housing etc.
  • China Wu Yi acquires Sh530m Kilifi land.
  • In April last year, Mara bought a 45.5% stake in Naivasha-based Buffalo Mall for Sh. 440 million. Mara has valued its investment in Buffalo Mall at $6 million (Sh. 603 million), implying a capital gain of Sh. 163 million in less than a year. The mall now brings in 2% of the multinational’s total revenues and represents 2% of its assets. The property is however yet to make a profit, with the six months ended December showing a pre-tax loss of Sh.2.8 million.
  • EDIT  Uchumi expects to conclude a deal with an investor that is worth Kshs 3.5 billion of new shares.

Telecommunications, Media & Publishing

  • Vodafone sold a 35% stake in Safaricom to South Africa’s Vodacom (link)
  • The Competition Authority of Kenya has authorized the proposed acquisition of certain passive infrastructure of East Africa Towers by Kenya Towers.
  • Catalyst Principal Partners has acquired a significant minority interest in Kensta Group, a 52-year-old East African printing and packaging company Kensta Group manages a diverse set of companies within East Africa namely Transpaper (Kenya, Uganda, Tanzania, Rwanda), Express Automation (Kenya, Uganda, Tanzania, Rwanda), Vivid Printing Equipment, Fusion Inks, Zenith Rubber Rollers and Phiramid (Zambia).
  • Kenyan IT multinational Craft Silicon has acquired a Sh51.5 million minority stake in restaurants listing portal EatOut, marking its second major backing of a local tech company. Craft Silicon is a founder-shareholder of Little, which is also backed by local telco giant Safaricom. (via Business Daily)
  • Deal undone: Ghafla Kenya CEO Samuel Majani spoke about how a Ghafla merger with Ringier unraveled and on a lot of the intricacies of the issues such as exclusivity, assets & liabilities, dealing with partners & other shareholders, and on merging staff, customers & systems.
  • Deal undone: a Merger with JamboPay was unstuck after a court finding, and the founder of JamboPay, the firm that supplies Nairobi County’s e-payments platform, won a protracted battle against a rival firm over use of its trade name.
  • Mara Social Media acquired global Instant Messaging & communications platform “Nimbuzz” which has over 200 million users and is available for Android, iPhone, and Symbian, MIDP, Windows Phone, BlackBerry and PC & MAC clients
  • Film Studios has been acquired by MoSound
  • MTN is to acquire MultiChoice Africa – owners of @DSTV & GoTV
  • EDIT The Competition Authority authorised the proposed acquisition of fibre optic cable from Bandwith  & Cloud Services Group by Safaricom.
  • EDIT Safaricom’s $1 million Safaricom Spark Venture Fund announced its sixth and final investment in agri-tech startup iProcure – which seeks to increase agricultural output in Kenya, which has remained comparatively low to other countries due to challenges including access to and use of quality inputs. Other invests include FarmDrive, Sendy, and mSurvey.
  • EDIT IFC invests Sh619m ($6 million) in mobile tech firm Africa’s Talking with the funds earmarked for the company’s expansion in Africa beyond the current seven markets where it has a presence.

Other

  • The Competition Authority of Kenya has authorized the acquisition of Section Investment by Kisima Management.
  • The Competition Authority of Kenya has authorized the proposed acquisition of 43.8% of Kinetic Holdings by Catalyst Kinetic Investments.

$1 = Kshs 103

Uchumi Rights Issue: CMA Acts – Part I

Yesterday the Capital Markets Authority (CMA) meted out punishment, following the Uchumi Supermarkets (USL) rights Issues.

Back in 2014. Uchumi’s rights issue to raise Kshs 895 million ($10 million) by offering shareholders 3 shares for every 8 held at Kshs 9 per share, with the funds to be used for expansion in East Africa and refurbishment of stores.

(Excerpts from) The CMA statement reads:

  • The regulatory breaches of the former directors and the two USL officers were identified in respect of the period of 2012 – 2015 and involved making changes to the Information Memorandum (IM) after CMA approval; failing to make proper disclosure of material information to inform investor decision making; misapplication of Rights Issue (RI) proceeds; mis-statement of financial statements in 2014; weaknesses in board oversight of the branch expansion programme; inadequate conflict of interest management; and inadequate disclosure of asset sale and leaseback arrangements. The breaches of the transaction advisor revolve around not ensuring changes made to an approved IM were submitted to CMA for further approval.

Also that

  • Out of the Ksh895 million right issue proceeds received by USL in January 2015 it was established that a small portion was used to pay the rights issue expenses but the balance was transferred to the trading account from where payments were being made to settle outstanding suppliers’ debts as opposed to funding branch expansion.

And

  • With respect to the financial statements for the period ended June 30, 2014, that were used to support the Right Issue, it was established that a Ksh350 million asset sale and lease back transaction was recognized, while the agreement for the same was signed and funds received in September 2014 . As a result of this recognition, USL’s profits as at June 30, 2014 were enhanced by Ksh19.97 million arising from the gain on sale of the assets. Further, the USL liabilities were understated to the tune of approximately Kshs.1 billion. The Board subsequently reversed this treatment in the audited accounts in 2015, stating that this recognition had been premature.

Other recent actions by the CMA have targeted directors of Imperial Bank and CMC Group.

Uchumi: This Is It

It’s hard to believe that I’ve been writing about Uchumi Supermarkets for as long, as I’ve had this blog – about ten years. The company seems to go through a cycle every few years of capital injection, expansion & new store openings, shareholder reassurance, a few years of smooth sailing, followed by diminishing stocks of products, management change (Suresh Shah, Titus Mugo, Kennedy Thairu, Masterten-Smith, Jonathan Ciano), restatement of accounts, change of auditors, restructuring of debts etc.

At the 2010 special meeting of shareholders (during a receivership period), Kenya’s solicitor general (speaking for the government, which had bailed out the company) said nothing was fundamentally wrong with Uchumi when it collapsed, just bad governance.

But this time, it hopes to have put the past behind, and things are now looking up again for Uchumi. Its CEO, Julius Kipngetich, was on a TV blitz last week where he recapped the position that the supermarket is in and the way forward. Uchumi is now lean after laying off 2,300 staff, closing its unprofitable Uganda and Tanzania subsidiaries as well as 7 branches in Kenya, one of which was in a mall (Taj) that was going to be demolished for expansion of a highway. They are in the process of selling non-core assets (3 land properties), re-negotiating with suppliers to settle debts and (in exchange for some equity) resume supplies, and seeking a new strategic investor.

Some of these have now advanced recent announcements that most suppliers have agreed to convert some debt in exchange for  about Kshs 1.8 billion of equity in the company. Also the Ngong Road Hyper branch has been sold (but Uchumi plans to continue occupying it as a tenant) and just this week the Visa Oshwal Business Community, who comprise key suppliers,   agreed to resume supplying stocks, with one of them ending a lawsuit to wind up Uchumi.

Uchumi’s latest restructuring is happening is at a time when supermarkets are ‘apparently’ booming in Kenya. Nakumatt just opened its 61st stores, Naivas and Tuskys are growing, despite the family battles they have, Choppies (of Botswana) has taken over Ukwala and Carrefour has just opened at The Hub in Karen, in upmarket Nairobi.

Uchumi basket

Banks like UBA are ready to support. KCB has been a long terms banker, and Jamii Bora banks is the largest shareholder (15%) of Uchumi, closely follow by the government (14%).

Uchumi stores now have almost all products back on the shelves, but with some familiar brands still missing, for now.  As the CEO, said in one interview, Uchumi aim to serve middle class consumers, who want to buy Kenyan products .

In the next three months, they hope to narrow down a strategic investor to be the anchor shareholder of Uchumi, from a pool of bidders that were invited privately.