Mergers, buy-outs to dominate the bourse

Britam Group Managing Director, Benson Wairegi (Left) and the Chairman of Real Insurance Sam Kamau exchange documents soon after announcing Britam’s acquisition of a 99 percent stake of Real Insurance. The deal will give Britam a foothold in Tanzania, Malawi and Mozambique.

What you need to know:

The trend of mergers and acquisitions that took centre stage on the Nairobi Securities Exchange last year is expected to continue in 2014 as companies move to expand their product offering and reach new markets.

The trend of mergers and acquisitions that took centre stage on the Nairobi Securities Exchange last year is expected to continue in 2014 as companies move to expand their product offering and reach new markets.

Capital markets analysts interviewed by Smart Company said the Nairobi bourse is expected to attract more investor funds this year as firms embark on expansion plans in the wake of improved business climate.  

Mr Aly Khan Satchu, chief executive Rich Management said the buyout frenzy on the exchange last year is set to continue this year as firms continue to diversify their investments both geographically and product-wise.

“In some respects, this was a land grab as bigger companies sought to carve out a more forward position. In other instances, it was about egregious mispricing by the stock market (Rea Vipingo). I expect this trend to gather speed in 2014,” he said.

MORE INVESTORS, MORE EXPENDITURE

Afrika Investment Bank (AIB) analyst Parshv Shah said the expectation of high levels of economic growth in Kenya in coming years should attract more investments in the country.

High consumer expenditure driven largely by a growing young population, urbanisation, a growing middle class, increased technology adoption, stable macroeconomic policies and improved business climate, are expected to be the key drivers of growth, he added.

“Given this economic climate, we expect that companies will be looking to raise capital to expand their existing businesses or enter via alliances with strategic partners and thus M&A (mergers and acquisition) activities in the country will be expected to grow at a faster rate than in previous years,” he said in an e-mail interview.

Adding: “We expect this to be particularly evident in fast-moving consumer goods, financial services, agribusiness, telecommunications, infrastructure and manufacturing.”

RECOVERY FROM FINANCIAL CRISIS

This comes on the back of the recovery of the stock exchange following foreign investor exit from the Nairobi bourse due to the 2007/08 post-election violence and the global financial crisis which followed.

The buyout news last year saw listed firms like Centum Investment, Rea Vipingo, Britam, CMC Motors and AccessKenya topping the charts.

The most notable was that of land-rich sisal firm, Rea Vipingo, which attracted three suitors, as analysts said more could be lining to table fresh bids.

Early last year, global technology firm, Dimension Data, made a Sh3.052 billion bid to acquire 100 per cent shares in local Internet service firm Access Kenya in line with its sub-Saharan Africa expansion plan.

The buyout was successful and AccessKenya subsequently delisted from the NSE on November 25, 2013.

After buying out a 73 per cent stake in Genesis Asset Management Limited, Centum made an offer to acquire Rea Vipingo at Sh3 billion, countering an offer of Sh2.4 billion by two British brothers, Richard and Jeremy Robinow.

Later, Bid Investment offered to buy the sisal firm at Sh3.3 billion but Centum hinted it could raise its bid to Sh5 billion for Rea.

“The agricultural sector is currently under severe onslaught from the M&A front as investment firms and real estate developers eye their prime land holdings,” said Mr Samuel Gichohi, NIC Securities business development manager.

He was referring to the competing offers for Rea Vipingo from Centum, Bid and the Robinow brothers.

“I expect to see more M&A action on that end going forward,” he said.

HIGH STAKES FOR BRITAM

Insurance firm, Britam also acquired 99 per cent stake in Real Insurance in a deal that is to be completed in the first quarter of 2014.

Analysts have valued the offer at Sh1 billion, 60 per cent of which will be paid in cash and 40 per cent made in a share swap agreement.

Britam also recently acquired a 25 per cent stake in Acorn Group, a project management firm, to scale up its activity in the real estate market.

Dubai-based investment firm, Al-Futtaim Group, also made a Sh7.5 billion cash offer for the purchase of 100 per cent of issued shares in troubled motor dealer, CMC Motors. The motor dealer is serving suspension from trading on the NSE.

CMC’s shareholders, 50.6 per cent of who have already approved the deal, have until January 24 this year to sell their stakes to the Al-Futtaim occasioning CMC’s delisting from the Nairobi bourse.

On successful acquisition, the investment will be the group’s first investment in sub-Sahara Africa.