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.
Seaboard Corporation of Delaware, acting in conjunction with Victus Limited, the majority owner of Unga Group, has offered to buy out other minority shareholders at Kshs 40 per share and de-list the company shares from the Nairobi Securities Exchange.
Seaboard of Delaware, owns 2.92% of the company, while Victus, a Kenyan investment company, owns 50.93% of Unga. The turnaround of Unga can be attributed to a strategic partnership with Seaboard and their management of the company. Going by revelations at past company annual general meetings (AGM’s), Seaboard has lent the company funding, and is paid an annual management fee that escalates as Unga gets more profitable. Keen Unga shareholders have also known for years that Seaboard has a right to acquire a majority stake in Unga.
Still, the offer of Kshs 40 per share, which value Unga at Kshs 3.03 billion, and which the Seaboard promoters state is a premium (33% above Unga’s current trading price of Kshs 30) is rather low. The share was trading at Kshs 44 per share two years ago, and one investor puts the company net asset value as at June 2017 at Kshs 52 per share, which will have gone up with the recent rise of the NSE later in the year.
The Unga Group had its 2016 AGM at the Intercontinental Hotel today. Revenue and profit were up, but profit was down compared to 2015 which has been boosted by the sale of a Bullpak subsidiary.
In comments at the AGM, the Unga chairman and MD spoke on various issues such as changing food patterns as seen in new products that they are adding to reach consumers and farmer segments, more technology being deployed in agriculture and the rise of young agri-preneurs who may be one day disrupt the food chain, difficulty obtaining quality maize, difficulties with getting timely payments from Nakumatt, and overall as slow down in the economy as seen in lower buying power for their products and a tightening of credit at banks.
Ahead of the usual votes to approve the accounts, directors re-election, dividend (Kshs 1/= share) and re-naming of the company to Unga PLC (as per the 2015 companies act), the shareholders Q&A was the main part of the AGM.
Dividends & Bonus: Why no bonus after the Bullpak sale? The money from Bullpak went to buy Ennsvalley Bakery (and shareholders had approved it)
Product reach: Unga is a national brand, that’s sold mainly in supermarkets, but are not in every part of the country. They are seeing challenges with buyers affording products and will introduce smaller packs of some products to remain affordable and within reach of consumers.
Gift items: One shareholder asked for Unga shopping vouchers instead of lunch, and when the Chairman announced that there was a product pack to go with lunch, this got a cheer from the many shareholders, but the very next question was for t-shirts to market the company.
The Chairman said they had made changes based on requests at past AGM’s but that she would endeavor to one day to have everything shareholders wanted – dividends , t-shirt, lunch, and product pack.
Recent stuff in the newspapers (mainly the Business Daily), Kenya Gazette (some of the just-approved deals were first announced two years ago) and press releases. $1 is about 95 Kenya shillings (and about 90 when deals were formulated)
Earlier this month, the Financial Times (FT) reported that mergers and acquisition (M&A) activity in Africa has fallen to its lowest level in more than a decade, as a result of collapsing commodity prices, political volatility and an anticipated rise in US interest rates. The value of African deals so far this year stands at $9.2 billion — 23% lower than the same period 12 months ago and the lowest level recorded since 2004, according to data from Dealogic.
Burbidge Capital also found that Kenya’s merger & acquisition deals slowed down in 2015 – with 11 M&A deals so far compared to 17 in the first four months of 2014. This year, the largest concluded deals have seen Helios sell a stake in Equity Bank to Norwegian funds and Old Mutual’s purchase of a 60.7% in UAP Holdings.
More mergers are expected in the Kenyan banking sector as the Treasury Secretary announced that an increase in the minimum capital to strengthen banks’ capital base and increase competition…progressively from the current Kshs 1 billion to Kshs 5 billion (~52 million) by 2018. 20 banks are below the Kshs 2 billion mark.
Helios cashing out; Norfund & Norwegian private investors are acquiring 50% of Helios partners investment in Kenya’ Equity Bank Group and will now own 12%. And today, Uganda’s National Social Security Fund has bought a 2.44% stake in Equity Bank Group from Helios Investors at Kshs 50 per share – and the new deal is worth ~$50 million.
National Bank management said it has not been briefed on any merger plans with its State-owned rival Consolidated Bank. Treasury Secretary Henry Rotich said National Bank would be merged with another bank before it’s planned rights issue. The government is the biggest shareholder of National Bank controlling about 79% of shares consisting of Treasury and NSSF stakes. As part of a rights issue, it is expected that NBK will retire its preference shares (held by the Treasury and NSSF) by converting them into ordinary shares.
High-level talks regarding a merger between NIC Bank and Commercial Bank of Africa are reportedly taking place but Mshwari may be spun out of any resulting entity. Both are mid-tier banks with quite a focus on corporate and high-end clients.
While Mwalimu SACCO is acquiring 51% of Equatorial Commercial Bank (ECB), the Society is not converting into a bank nor merging with ECB.
Kenya’s Nairobi Securities Exchange is acquiring 77% of their associate company CDSC, which they own with stockbrokers, in a deal worth~Kshs 260 million.
Barclays Africa advised on the largest sale of an African Bank in 2014 – a deal, in which Nigeria state-owned Asset Management Corporation of Nigeria (AMCON) sold Mainstreet Bank to Skye Bank.
Equity Group Holdings agreed to acquire 79% of ProCredit Bank Congo, the 7th largest bank (by assets) in DRC. ProCredit has total assets of $200 million, a customer base of over 170,000, and has KfW (12%) and IFC (9%) amongst its shareholders.
Liaison Financial Services who have just been approved as an investment advisor in Kenya recently acquired the African business of Knutson Global who were involved in asset-backed securities, municipal development bonds and consumer lending.
Oxford Business Group expects strong Kenya insurance M&A as companies merge to increase market share & meet higher capital requirements.
The Mauritian Minister for Financial Services, Roshi Bhadain, said the State Insurance Company of Mauritius (SICOM), would take over the 23.9% stake (valued at more than Kshs 13 billion) held by Businessman, Mr. Dawood Rawat, in financial services firm British-American Investments Company (Kenya) – a.k.a. Britam. This comes after the government of Mauritius placed Rawat’s firms in receivership over alleged financial impropriety charges.
UAP and Old Mutual agreed on a merger ahead of listing. This comes after Old Mutual raised its shareholding to 60% from 23% after buying 37% from private equity (PE) firms Aureos, Africinvest and Swedfund for around Kshs 14 billion. Old Mutual will not buy out the other 1,000 minority shareholders (who are staff & agents). Old Mutual first bought into UAP in January by acquiring a 23.3% stake from Centum Investments and businessman Chris Kirubi. Centum sold its stake to get the funding it needed for its massive real estate, financial services and power projects.
Also, the Competition Authority approved the acquisition of 60% of UAP Holdings by Old Mutual Holdings and Old Mutual Life Assurance.
Barclays Africa will acquire 63% of First Assurance, Kenya’s No. 10 insurer, for Kshs 2.8 billion (~$30 million).
KCB Group is said to be considering a takeover of Madison Insurance.
Pan Africa Insurance shareholders approved the acquisition of at least 51% of Gateway Insurance. Through this acquisition, the company will enter into the general insurance business.
Kenya’s competition authority approved the acquisition of 61.2% of Resolution Health East Africa by Leapfrog II Holdings.
The Heron Portico, which is managed by Indian hospitality group Sarovar Hotels & Resorts, says the acquisition of rival Zehneria Hotel in Nairobi’s Westlands in a Kshs 1 billion buyout to expand its market share in conference tourism and hospitality industry in Kenya. The Heron Portico financed 80% of the purchase price using debt while the rest is self-financed.
Minor Hotel Group of Thailand, and Elewana Afrika, are acquiring 6 camps spread across national parks in Meru, Samburu and Narok counties. Stefano and Liz Cheli (Cheli and Peacock Group), the founders of the camps, will continue to run the resorts and focus on business development.
Kenya’s Competition Authority approved the acquisition by Fortune Hotels of Paradise Safari Park and 85% of Paradise Investments and Development Kenya held by Paradise Company.
TPSEA (Serena) acquires 25.1% of TPS (D) that was set up to run the Movenpick Hotel in Dar, now known as the Dar es Salaam Serena Hotel in Tanzania.
Frontier Services Group (FSG), a Nairobi-based logistics firm, has completed its purchase of Cheetah Logistics SARL – Congolese transport company as part of central and western Africa expansion plan. Kenya’s competition authority also approved the acquisition of Phoenix Aviation by Frontier Services Group as well as the acquisition of 55% of Tradewinds Aviation Services by NAS Africa Aviation.
UK logistics and engineering firm Atlas Development says it is in advanced stages of discussions with potential takeover targets in Kenya, Tanzania and Ethiopia.
Part of Best Wing Cargo operations at JKIA have been transferred to Suppercare Freight Services.
Part of Fastlane Freight Forwarders operations at JKIA have been transferred to Airwagon Cargo Movers.
Norfund to acquire a stake in Globeleq Africa from Actis for $225M and partner with CDC to pursue power generation opportunities.
UAE’s Gulf Petrochem Group acquires Essar Petroleum East Africa and renames it as Aspam Energy (Kenya) in a deal to enhance the group’s integrated services and products for the downstream supply chain in the oil and gas sector in East Africa.
Scangroup dropped a bid to acquire 80% of Experiential Marketing, as approvals were not granted in time. Scangroup shareholders later renamed the company WPP Scangroup signifying that WPP Scangroup and WPP plc. are now fully together, with a shared vision for developing marketing communications across Sub Saharan Africa.
Hill+Knowlton Strategies (H+K), and Buchanan, one of the world’s leading financial communications consultancies, joined forces to launch H+K Financial, a specialist financial communications division dedicated to the Middle East and Africa.
Millicom is to acquire 85% of Zanzibar’s Zantel for $1 and take over $74 million of its debts. Zantel is the leading Telco in Zanzibar (but just 5% to Tanzania’s total) with $82m in revenue and 1.7m customers.
Kenyan innovation, Wezatele, was acquired for $1.7 million by AFB Kenya.
Techno Brain acquired the trips™ suite of integrated customs &revenue software from Crown Agents to provide tax and customs solutions that target the broader financial management needs of the government.
Akvo Kenya transfers the business of building open source internet and mobile software to support international development partnerships to Akvo Kenya Foundation.
A Paris-based PE fund bought 30% of Ramco Plexus, a subsidiary of Ramco Group that has an annual turnover of Kshs 5.5 billion. The Ramco Group was started in 1948 as a hardware store and has grown into a 34-subsidiary strong business, which employs 3,000 people.
The Competition Authority approved the acquisition of 51% of Bullpark by Nampak Holdings.
Business transfer: Antipest Kenya Limited, has transferred to Modern Ways.
Business transfer: Unicorn Pharma Kenya has been sold and transferred to Medisel (Kenya)
The Competition Authority approved the acquisition of the assets of European Perfumes and Cosmetics by Charm Industries. The deal excludes the debts of Varanasi Deepak, and Chirag Savia.
Agri Business/Food Business
Syngenta rejected Monsanto’s $45 billion merger offer. An eventual agreement will have an impact on Kenya’s agricultural sector.
Shareholders of REA Vipingo Plantations approved the sale of the firm’s land at Vipingo to Centum Investments as agreed upon in a settlement with R.E.A Trading.
Giant milk processor Brookside Dairy has bought out Sameer Agriculture & Livestock business in Uganda for Sh3.5 billion (~$38 million). The government of Uganda, which owns 49% (of Sameer) confirmed this on March 25.
Business transfer: Pure Imported (formerly European Foods E.A. Limited) (which was in the business of importing & selling deep frozen foods and supplying fresh juices) to European Foods Africa.
The Competition Authority exempted the production, bottling supply and distribution business between Distell and Kenya Wine AgenciesBusiness transfer: for 5 years.
Business transfer: The ice cream production & trading business of Alpha Dairy Products is being transferred to Razco.
Tanzania’s Competition Commission may reverse its decision approving for EABL to merge with Serengeti Breweries, as Serengeti’s performance failed to meet expectations.
The Competition Authority approved the acquisition of an additional 30% in Largo Investments by NAS Holdings.
The Competition Authority approved the acquisition of the brands and assets of Chirag (Kenya) by Chirag Africa. Elsewhere these were acquired by newly-listed Flame Tree.
The Competition Authority approved the acquisition of 52% of Ennsvalley Bakery by Unga Holdings.
Norwegian private equity fund, Norfund, has bought shares in agriculture firm Vertical Agro in a Kshs 476 million (38.7 million Norwegian krone) deal. Vertical Agro is the parent company of Sunripe and Serengeti Fresh which makes it the largest exporter of organic vegetables in the country. The company produces 6,500 tonnes of fruits and vegetables annually from its farms in Kenya, Tanzania and Ethiopia.
Kenya’s Competition Authority has approved (i) The acquisition of 50% of Equatorial Commercial Bank Centre by Fidelity Shield Insurance (ii) The acquisition of Parkway Investments by Mt. Kenya University Trustees (iii) The acquisition of Endebees Estate (Kilifi Holdings) by Balloobhoni Chhotabhai Patel.
The 2014 annual general meeting (AGM) of Unga Ltd. shareholders took place at KICC in Nairobi on December 2 2014. The meeting started on time, and with good attendance, and the set-up was different with the ‘speaker’ (primarily the Chairperson) using a lectern as opposed to answering questions while seated.
Maize milling is not very profitable due to tax evading competition at the county level and has been brought back in-house to control the consistency of quality and supply. Also, Unga has implemented new Route-to-Market strategies and is opening up stores/warehouses that sell exclusively Unga products to overcome distribution problems in some areas.
Unga wants to become a ‘nutrition company’ versus remaining a miller. Therefore Unga has ventured into selling cereals e.g. beans, green grams, etc packaged under ‘Amana’ to attract high-end shoppers.
Unga got shareholder approval to buy 52% of Ennsvalley Bakery which retails its products through high-end outlets e.g. Nakumatt. Unga’s board (CEO spoke on this) feels Unga can revamp the firm to expand rapidly with a larger product range. The purchase of 52% in Ennsvalley is being financed by the proceeds from the sale of its 51% stake in Bullpak (for Kshs. 335M) and additional cash from internal operations. Unga will also loan additional funds to Ennsvalley at 15%.
There were interesting (& relevant) questions including the feeling that the sale of Bullpak was ‘cheap’ given the profitability of Bullpak. Some shareholders questioned the high purchase price multiples of Ennsvalley given the low sale price multiple of Bullpak. (Bullpak was a cash cow vs the cash hog Ennsvalley will be for a few years). Also, one of the Unga directors had to declare his interest in Ennsvalley though the extent of his family’s ownership wasn’t stated.
There was a discussion on GMOs and the MD said that, by seeing world trends, it is just a matter of time before the Government of Kenya has little choice but to approve GMO cereals especially if the region suffers extended drought conditions.
SWAG? No more bales of flour to be given to shareholders as the cost is too high on a per shareholder basis. This decision was made in earlier years and will remain so in the future.