We were duped into buying Uchumi shares, says Jamii Bora Bank

The management of Jamii Bora Bank has told shareholders that it was duped into buying Uchumi Supermarkets shares.

The bank's chief executive officer (CEO) Samuel Kimani said the information memorandum used to entice the tier II lender into the Sh500 million acquisition did not show the true position of the retail chain.

“As a listed company, we got the transaction approved by all regulators but the information memorandum was a work of fiction, it did not reflect what we found there,” said Mr Kimani yesterday at the bank’s annual general meeting.

“We feel cheated because unlike a private company where you do due diligence, with a listed company you depend on the information memorandum provided,” he said.

Jamii Bora Bank together with Goodwill, an affiliate company, increased their shareholding of Uchumi to 15.8 per cent last year.

The government holds a 14.67 per cent stake of the retail chain.

The bank has been buying shares in the listed retailer since November 2014 when Uchumi was making a cash call that raised Sh1.5 billion, surpassing the Sh896 million target.

The bank’s CEO said that it had strategically bought into the retailer to ride on the chain’s countrywide network of distribution and its clientele.

He said while acquiring another bank would have been a costly affair, Jamii Bora Bank concluded that the Sh500 million investment was “a small price to pay”.

“When you want to scale up, you buy another bank but that is expensive, take for instance Giro Bank that was bought by I&M, for Sh5 billion,” Mr Kimani said at the meeting.

He said the bank decided to take up Uchumi, which offered an opportunity to access 800,000 more customers.

The retail chain also offered access to a supply chain of about 2,000 companies as well as 40 extra outlets when Jamii Bora Bank bought it.

“As at now, Uchumi is insolvent, but all is not lost, I believe Uchumi will still pay off, especially after suppliers agreed to convert debt into equity and the government is in talks with its management for a loan,” said Mr Kimani.

The Nairobi bourse has come under criticism from investors over the number of listed companies that have sunk millions of shillings in investments with shareholder value getting wiped out for some listed stocks.

Investors have complained that some companies, which have recently come under duress, including Uchumi, Mumias Sugar, Kenya Airways, Atlas Development and TransCentury, have seen investors pay dearly for their poor performance.

A. Baumann Hutchings Biemer has been suspended from trading for years, while information technology firm AccessKenya had its value heavily eroded after which it was acquired and subsequently delisted from the bourse.