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Regulator awaits proposal on Seaboard, Unga deal

Martin Mwita @PeopleDailyKe

Finer details of the proposed buyout of Unga Group (Plc) by Seaboard Corporation are yet to be filed with the Competition Authority of Kenya even as a section of shareholders oppose the transaction.

The agency, mandated to enforce the Competition Act, said the parties in the deal must table their proposal for scrutiny to ensure interests of other shareholders are protected. Competition Authority of Kenya (CAK) Director-General Wang’ombe Kariuki said the regulator will not approve any deal that undermines effective competition at the marketplace or misleading market conduct.

“So far, we have not seen their arrangement. They have to submit their application for scrutiny and approval for fair competition,” Kariuki told People Daily, “it is a matter of complying with the law.”

The deal is also subject to approval by the Capital Markets Authority pursuant to Regulation 4(2) of the Capital Markets (Takeovers and Mergers). This is under the Capital Markets Authority Act.

Capital Markets Authority (CMA) chief executive Paul Muthaura confirmed the authority is aware of the deal and it is following its progress. “They have lodged documentation on the buyout in line with the law,” Muthaura told People Daily adding: “I cannot comment further because it is an ongoing process.”

Seaboard, working in concert with a group of local investors, including Victus Ltd, last week made public its intension to buy out other Unga shareholders, with an offer of Sh40 per share.

The Delaware-based conglomerate intends to acquire an additional 46.1 per cent stake in the Nairobi Securities Exchange listed miller. The offer values the entire issued ordinary share capital of Unga Group at Sh3.03 billion.

The deal has, however, met opposition from a section of shareholders who argue the human and animal feeds manufacturer has been undervalued by about Sh701.5 million. Among those opposed to the buyout is Sayani Investments, which owns 800,000 shares in the miller.

Indeed, shareholder uproar is likely to inform decisions taken by CAK and CMA as Seaboard races to finalise the transaction by September 30. Victus Ltd is linked to the family of former Central Bank governor, the late Philip Ndegwa, former President Daniel Arap Moi and Mawara Ltd, which is associated with former East African Breweries chairman Jeremiah Kiereini.

“On February 6, 2018, the Chief Executive Officer of Seaboard Corporation made a corporate decision approving a proposed offer for the acquisition of the shareholding in Unga Group PLC,” Seaboard Corporation said in a public notice last Thursday.

Shareholders have argued that the offer is 18.8 per cent below its book value of Sh3.7 billion. They further say the millers company’s assets including physical structures and leasehold land were valued in 2013. The four-year gap, according to shareholders, has a significant value variation in the wake of rising land and property prices in the country.

In Unga’s latest annual financial report, the firm indicates that the leasehold land was revalued at Sh878.5 million on an open market value basis by Knight Frank Valuers Limited.

As at June 30, 2017, the issued share capital comprised 75,708,873 ordinary shares of Sh5.00 each, all of which are voting shares. Should Seaboard close the deal, it will pay minority investors a cumulative Sh1.4 billion. Yesterday, Unga’s stock closed at Sh32.5.

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