Seaboard’s Unga takeover bid meets minority owners’ opposition

KENYA – Minority shareholders have rejected Delaware-based conglomerate, Seaboard Corporation’s quest to acquire an additional 46.1 per cent stake in Unga Group , arguing it undervalues the Nairobi Securities Exchange-listed firm by Sh701.5 million.

Seaboard’s buyout offer of Sh40 per share values Unga at Sh3 billion, 18.8 per cent below its book value of Sh3.7 billion or Sh49.2 per share as of June 2017.

Seaboard, which already owns a 2.92 per cent of Unga, will raise its stake to 49 per cent if the acquisition goes through.

The US firm, working in concert with a group of local investors, including the Philip Ndegwa family, plans to delist the company by the end of the year. The Ndegwa family has a 50.93 per cent stake in Unga through Victus Limited.

The lowball offer has, however, met strong opposition from minority investors, some of who called to say they will block Seaboard’s bid.

“This offer undervalues Unga and we are going to reject it,” said Karim Jetha, the managing director of Sayani Investments, which owns 800,000 shares in the miller.

Mr Jetha said Sayani and other institutional investors have teamed up to consider other options, including making a rival bid and going to court.

This marks the latest attempt to buy a publicly traded company on the cheap.

British brothers Richard and Jeremy Robinow in November 2013 tried to buy the 42.96 per cent stake they did not own in agricultural firm Rea Vipingo for Sh1 billion.

They were, however, forced to more than double the offer to Sh2.2 billion after rival bids from other suitors, including billionaire entrepreneur Chris Kirubi joined the fray through his Centum Investment Company.

In keeping up with previous takeover practices, the NSE yesterday suspended trading in Unga’s shares, leaving retail investors stranded with Seaboard’s controversial offer.

Long-term shareholders, who bought the stock in the first eight months of 2015 – when its price averaged Sh44.2 — will be among the biggest losers if the transaction proceeds in its current form.

Seaboard, which owns a separate 35 per cent stake in Unga’s operating subsidiaries, has touted the fact that its offer represents a major premium on the company’s share price, but makes no mention of what the miller is actually worth.

At Sh40, the bid is a 36.7 per cent premium on Unga’s last trading price of Sh29.25 per share, which valued the extra shares it is targeting at Sh1 billion.

Seaboard now plans to pay the minority investors an aggregate of Sh1.4 billion, denying them an extra Sh323.5 million if they were to get the full price of Sh1.7 billion.

If successful, the buyout will leave Seaboard and Victus in control of the company whose full value they can realise outside the scrutiny of the securities market.

Seaboard’s effective stake in Unga’s operating units will rise to 66.8 per cent, with Victus holding the remaining 33.1 per cent.

Some of the miller’s most valuable assets include buildings and leasehold land that were last revalued in 2013, indicating that their market price could have risen significantly in recent years.

“The leasehold land was revalued as at June 30, 2013 by Knight Frank Valuers Limited on an open market value basis for existing use at Sh878.5 million,” the miller says in its latest annual report.

The company has also built up retained earnings to the tune of Sh2.6 billion as of June 2017 after years of paying out a fraction of its net earnings as dividends.

Seaboard says it needs shareholders holding at least 21.1 per cent to tender their shares for the offer to proceed.

This means that the multinational will need the backing of most individual investors holding less than 100,000 shares, with those owning larger blocks having voiced their objection.

The offer marks Seaboard’s latest move to invest in the miller which it rescued in 2000 by taking a 35 per cent stake in its operating units for Sh1.1 billion.

Business Daily

 

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