Seaboard’s failure to reach 75% minimum threshold in Unga blamed on activist investors

KENYA – US firm, Seaboard’s planned buyout offer for Unga Group has flopped as it was unable to garner support from shareholders holding a minimum combined stake of 75% in the miller.

Daily Nation has reported that a takeover failure was attributed to a group of significant investors who refused to sell their shares, accusing the acquirer of an attempt to buy the company at a cheap price.

However, Seaboard has signalled intention to proceed with the purchase of shares from investors who had previously accepted the offer adding that the takeover conditions could be waived, allowing it to buy the tendered shares.

“The potential additional payment per the earn-out is based on performance of the business, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) as a metric, for the first five years after closing of the transaction,” said Seaboard in a statement to shareholders.

Undervalued transaction

In the controversially proposed deal, the Delaware-based corporation offered US$0.40 per share for Unga Group but this was rejected by minority shareholders earlier this year.

Citing the company’s assets, this group of shareholders referred to the offer as inadequate and undervalued it by great margins.

Determined to block the takeover, the activist investors wrote protest letters to the board of the company and to some extend bought more shares in the open market, reported Business Daily.

Although the Capital Markets Authority (CMA) declined to intervene in the transactions at some point, the investors determined to block the transaction that would have rendered the Unga firm privately owned.

Over the offer period small investors are said to have bought more shares on Nairobi Stock Exchange (NSE), where some 4.9 million shares amounting to 6.4% equity were traded.

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Mr Gadani has 3.5 million shares equivalent to a 4.64% stake in Unga, Mr Bid has 2.3 million shares (3 %) in the miller through his investment vehicle BID Portfolio Management while Mr Jetha has 1.1 million shares held through his firm Sayani Investments.

Seaboard acquired Groupe Mimran’s flour milling and associated businesses located in Senegal, Ivory Coast and Monaco for US$375 million in January to expand its footprint on the continent.

In contrast to the Unga acquisition bid, Seaboard agreed to pay additional amount of US$48m to Mimran shareholders in case the business met certain performance targets in the future.

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