US firm’s Unga takeover bid meets opposition

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

Seaboard’s buyout-offer of US$0.39 per share values Unga at US$29.6 million, 18.8% below its book value of US$36.5 million or US$0.48 per share as of June 2017.

Seaboard, which already owns a 2.92% of Unga, will raise its stake to 49% 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.

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The Ndegwa family has a 50.93% stake in Unga through Victus Limited.

The 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.

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 US$0.43 will be among the biggest losers if the transaction proceeds in its current form.

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Seaboard, which owns a separate 35% 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.

Seaboard now plans to pay the minority investors an aggregate of US413.8million, denying them an extra US$3.1 million if they were to get the full price of US$16.7 million.

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%, with Victus holding the remaining 33.1%.

The offer marks Seaboard’s latest move to invest in the miller which it rescued in 2000 by taking a 35% stake in its operating units for US$10.8 million.

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