Billionaire investor Chris Kirubi and NSE-listed firm Centum have signed an agreement to sell their shares in insurance group UAP Holdings to Old Mutual, in a deal that will see the two earn more than Sh7 billion.
Mr Kirubi’s 9.58 per cent stake in the insurance group is set to earn him more than Sh2.8 billion while Centum will receive in excess of Sh4 billion for its 13.75 per cent shareholding in the company.
Mr Kirubi controls 25.2 per cent of Centum, making him an indirect beneficiary of the amount that is due to the Nairobi Securities Exchange-listed investment company.
“The sale is in line with Centum’s mission to be Africa’s foremost investment channel,” said the Centum CEO James Mworia in a statement.
Both Mr Kirubi and Centum have held the UAP shares for more than a decade.
The transaction is priced at an undisclosed premium on UAP’s current price of Sh140 per share on the over-the-counter (OTC) market.
With its 211 million issued shares, UAP is valued at about Sh29.5 billion going by the OTC price.
The transactions came after UAP itself reduced its stake in Centum last year by selling 2.9 million units of the investment firm’s shares valued at over Sh180 million, with the new deals effectively ending the cross-ownership between the two firms.
The deal signals an aggressive expansion plan by the UK-based Old Mutual into the local financial services sector.
The multinational last year bought a 67 per cent stake in microfinance institution Faulu Kenya for Sh3.6 billion, expanding its local financial services beyond stock brokerage, insurance and asset management.
Centum said it will re-invest proceeds from the sale of its UAP shares.
“Centum will continue developing other investment opportunities,” said Mr Mworia.
The company has announced aggressive expansion plans, including acquisitions, new projects and accumulation of more shares in its existing portfolio companies. The cash will help fund the projects, easing pressure on the company to seek more joint venture partners and debt financing.
Centum, for instance, intends to fully acquire agricultural firm Rea Vipingo here it already owns 296,500 shares equivalent to a 0.49 per cent stake.
The planned acquisition, if successful, will cost Centum Sh4.5 billion based on its latest proposal to buy out Rea Vipingo’s shareholders at Sh75 per share.
Centum, however, faces a rival buyout bid from Britons Richard Robinow and Jeremy Robinow who already control 57.04 per cent of Rea Vipingo and who made the made the first move to fully acquire the sisal producer.
The rivals had engaged in a bidding war that saw Centum sue the British brothers, arguing that their offer of between Sh70 and Sh85 per share was illegal.
The matter is before the Capital Markets Authority tribunal. Centum is also in the middle of multi-billion-shilling property developments in Kenya (Two Rivers Complex) and Uganda (Pearl Marina).
The two projects will see the firm build shopping malls, hotels, apartments and office blocks together with joint venture partners.
Centum has also taken loans running into billions of shillings to finance part of the projects that are being developed in phases.
The firm’s aggressive expansion has forced it to rely heavily on debt and partnerships, with the costs of acquisitions and green ventures dwarfing its profits, which it has been re-investing fully since 2009.
Centum recently acquired a 66 per cent stake in K-Rep Bank for an estimated Sh2.5 billion, raising its equity in the lender to 67.54 per cent.
It has also moved to acquire an extra three per cent stake in local Coca Cola bottler Almasi Beverages at a cost of over Sh100 million, a transaction that will raise its interest in the firm to 50.95 per cent.
Another large pending deal is the Sh174 billion Lamu coal plant whose contract was awarded to a consortium led by Centum, drawing complaints from losing bidders.
The dispute was taken to court and it remains to be seen whether the decision to award the project to the investment firm’s consortium will be upheld.
For Mr Kirubi, the UAP deal gives him the liquidity he needs to fulfil his goal of raising his stake in Centum to 29.9 per cent.
When he first announced the intended share purchase in September 2013, his cost was Sh832 million based on Centum’s trading price of Sh25.5 at the time.
The stock has, however, more than doubled to trade at Sh62.5, raising his current potential cost to Sh2 billion.
The businessman bought four million shares in the investment firm in the nine months to November, boosting his equity to 25.2 per cent from the previous 24.6 per cent.
He says the share purchases are a reflection of his confidence in the future prospects of Centum where he has concentrated his efforts over the past one year.
The businessman has liquidated his position in several listed firms, including Safaricom and KCB, where he was one of the largest individual investors.
Mr Kirubi attributed the share sales to profit-taking in line with his declared active trading strategy.
He has, however, vowed not to sell his Centum shares even at a buyout offer of Sh100 per share, which represents a 60 per cent premium on the current trading price.
Centum’s net profit increased 37.8 per cent in the half year ended September to Sh1.2 billion compared to Sh892 million a year earlier.
This came as investment income rose 58.3 per cent to Sh1.8 billion.
Its share price has gained 87 per cent in the past 12 months, offering a profit-taking opportunity to investors who don’t have the option of receiving a dividend.