Rea Vipingo to delist if investors with 90pc stake back buyout bid

The majority owners of agricultural firm, Rea Vipingo, plan to apply for delisting of the company only if they are backed by investors holding 90 per cent stake.

REA Trading Company, through which two British brothers hold a controlling stake in Rea Vipingo, has said unless the threshold is met, the company’s share will continue trading on the Nairobi Securities Exchange.

The two British brothers, Richard Robinow and Jeremy Robinow, currently control 56 per cent of Rea Vipingo’s 60 million issued shares as at December 2014.  This translates to  33.6 million shares.

Their firm, Rea Trading Company, has offered to buy out about 6,000 Rea Vipingo’s small shareholders at a price of Sh85 per share with an aim of de-listing the sisal company from the stock market.

“Our offer is unconditional but we shall only delist if we achieve a 90 per cent acceptance rate from the other shareholders,” said Mr Richard Robinow in an interview.

SEEK APPROVAL

Essentially, the two will need to  marshal the support of shareholders who collectively own 23.8 million shares, which is 90 per cent of the total 26.4 million shares that are not under the control of REA Trading.

Rea Vipingo is set to hold an extra ordinary general meeting later this month where the British brothers will seek the approval of the other shareholders to buy them out.

“If the threshold is achieved, the remaining shares (3.1 million) are not substantial enough to sustain needed liquidity for trading at the bourse,” said Mr Robinow.

The Capital Markets Authority  has no set threshold for a majority shareholder to apply for delisting. However, but a 90 per cent controlling stake carries enough voting rights to overwhelmingly pass any resolution, including a motion to delist.

The markets regulator, however, has a provision that allows investors controlling at least 90 per cent of a company’s issued shares to compulsorily acquire the remaining shares at market price or the offer price, which in Vipingo’s case is Sh85.

The British brothers are seeking to diversify Rea Vipingo’s predominant sisal business through capital injection of between Sh910 million and Sh1.3 billion over the next four years.

They two however say they  would only put in the money  if they wholly own the company.

“We need to take the business to another direction but we are comfortable risking our own money than shouldering expectations of about 6,000 investors,” they said.

REA Trading Company seeks to enter energy production and plans to take advantage of the pulpy waste from sisal processing to produce methane. Part of the energy  would be sold to the national grid.

DIVERSIFICATION

Should the two British brothers’ offer be accepted by shareholders,  They would expand Rea Vipingo’s existing vegetable business over  four years to reduce reliance on revenues from sisal.

The delisting and diversification plans come barely a fortnight after REA Trading and investment company Centum entered into an out-of-court settlement following a lengthy and protracted takeover bids that started with a Sh40 offer from REA Trading.

Centum’s first bid, in December 2013, was Sh50 per share  and rose up to Sh70. Centum’s bid was, however, edged out by REA’s Sh70 a share with a promise of an additional Sh15 apiece in future land sales, bringing the total to Sh85.

Abusing rules

However, it is this promise that resulted in Centum moving to court, accusing the British brothers of abusing takeover rules.

The out-of-court deal would now see Centum acquire 10,546 acres of Rea Vipingo’s land for about Sh2 billion. The agreement leaves the Robinows with about 60,000 acres since Rea Vipingo currently has about 69,000 acres straddling Kenya and Tanzania.

The two companies also agreed that Rea Vipingo would be Centum’s tenants on the 10,000 acres with their tenancy agreement reviewed after expiry of each sisal plantation.

Centum Investment currently holds a 0.49 per cent stake in Rea or 2.94 million shares and has already pledged to support the takeover bid by the British brothers leaving them with the task of convincing the holders of 20.9 million shareholders to accept the Sh85 offer price.