BOC Kenya board sits on the fence in regards to company take over by Carbacid

KENYA – The takeover of manufacturer of industrial, medical and special gases, BOC Kenya by Carbacid Investments Limited, East Africa’s leading supplier of food grade liquefied carbon dioxide has hit a speed bump.

The independent adviser, Dyer and Blair Investment Bank, who was hired to review the transaction offer made by Carbacid at Ksh63.5 (US$0.58) per share, has indicated it undervalues BOC Kenya by 30.8 per cent.

The adviser wrote to the board of BOC, stating that the company has a fair value of Ksh91.76 (US$0.84) or an aggregate of Ksh1.7 billion (US$15.4m).

This is Ksh552 million (US$2.02m) more than Carbacid’s total bid price of Ksh1.2 billion (US$10.9m), reports Business Daily.

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“Your board has therefore for the foregoing reasons resolved NOT to recommend the offer for acceptance by shareholders.”

BOC Kenya Board

To this end, the board of the BOC has made the decision of not recommending the company’s acquisition to its shareholders.

“Having carefully considered the opinion of the independent adviser … the board unanimously agrees that the price of Ksh63.5 (US$0.58) does not reflect a fair value of the company,” BOC says in a circular to shareholders.

“Your board has therefore for the foregoing reasons resolved NOT to recommend the offer for acceptance by shareholders. Shareholders are therefore encouraged to obtain independent professional advice from their professional advisers regarding the merits of accepting or not accepting the offer.”

The investment bank’s assessment is set to complicate the transaction in which BOC’s majority shareholder, BOC Holdings, has already committed to sell its Ksh. 65.38 (US$0.58) per cent stake to Carbacid at the Ksh 63.5 (US$0.58) per share offer price.

Meanwhile, Carbacid Investments posted a 17.7 percent net profit growth in the half-year ended January, helped by increased sales of carbon dioxide.

The company’s net earnings in the six-month period stood at Ksh210.4 million (US$1.9m) compared to Ksh178.6 million (US$1.6m) the year before.

Sales of carbon dioxide, which is used to make fizzy beverages among other applications, jumped 27.4 percent to Ksh449.6 million (US$4.09m) from Ksh352.9 million (US$3.2m) amid market share gains.

The company sold 8.9 million kilogrammes of the commodity in the review period, representing a 21 percent increase from 7.4 million kilogrammes a year earlier.

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“Despite increasing competition and the impact of the pandemic the group managed, by being proactive to capture new markets and continuously engaging in process improvements,” Carbacid said of the sales growth.

“This resulted in the operating profit increasing by 28 percent compared to the corresponding period in the previous year, despite increasing operating and regulatory costs.”

The acquisition of BOC Kenya by Carbacid is meant to give Carbacid a competitive edge in the market as it expands its portfolio.

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