Shareholders opposed to the forced take-over of Unga Group by a US-based company and two Kenyan billionaire families have been told they will remain shareholders in an unlisted company “thereby limiting the liquidity in trading their shares.”

This subtle warning came after minority investors said they would block a US-based company Seaboard Corporation from taking over the company in a deal that will leave the company under the control of the family of former President Moi, the family of the late Central Bank Governor Phillip Ndegwa and the US family of Steven J. Bresky.

But will the minority shareholders manage to block Moi, Ndegwa and Bresky from taking over the control of Unga?

The late Phillip Ndegwa: Family not selling stake

That is the question many are asking after it emerged that the minority may have little room to manouvre.

Karim Jetha, the managing director of Sayani Investments, which owns 800,000 shares in the miller says the offer of Sh40 per share is low.

“This offer undervalues Unga and we are going to reject it,” he said

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

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.

The Unga Group which is controlled by the late Kirinyaga billionaire Phillip Ndegwa has joined hands with a US family business Seaboard Corporation to buy out the other shareholders and delist from the Nairobi Securities Exchange. The balance of the 38.5 million shares which are not part of the deal will be owned by Victus Limited, an investment company based in Nairobi which will still retain its shares.

Victus Ltd is owned by a company associated with President Daniel arap Moi’s Kabarak High School and with Mawara Ltd, which belongs to former East African Breweries chairman Mr. Jeremiah Kiereini, as well as with First Chartered Securities, associated with the families of the late Philip Ndegwa.

 

Moi family is retaining its stake

That will mean that the company will no longer face public scrutiny.

On February 22, Unga Group published an official announcement on the intended take-over which will cost Seaboard Sh1.39 billion if all the minority shareholders agree to sell.

It is intended that the proposed take-over will be complete by September 30, 2018.

“Unga shareholders shall at the appropriate time be notified of an extraordinary general meeting of the shareholders to discuss, and if thought fit, approve the de-listing of shares of Unga from the Nairobi Securities Exchange, subject to the take-over offer being successful,” Seaboard says in its offer dAt the moment, Seaboard holds 2.2 million ordinary shares each valued at Sh5 of Unga Holdings representing only 3 per cent of the issued share capital. They are now offering Sh40 for each ordinary share subject to approval by the NSE.

Owned by the family of American milling billionaire Steven J Bresky, the US company is today one of the largest pork production and processing companies in the US and also owns about 50 per cent stake in Butterball LLC the largest vertically integrated turkey producer and processor in the US.ocument submitted to the Capital Markets Authority and the Nairobi Securities Exchange.

The minority Shareholders in Unga Group first loss out in 2000 when the then  loss-making flour milling concern, concluded $1.9 million rights issue floated in June 2000.

 The issue managed only a 72.5 per cent subscription level, leaving about 2.5 million shares of the 8.5 million on offer without takers. It only realised $1.3 million out of the intended $1.9 million. Analysts argued that Victus Ltd was obliged under the rights issue document to absorb the extra 2.5 million shares, raising its interest in the group from 59.61 per cent to 67 per cent.

This is part of the Unga Statement released on February 22, 2018.

Introduction

The Board of Directors of Unga Group PLC (“Unga”) have, on 20 February 2018, received an Offeror’s Statement pursuant to Regulation 4(4) of the Take-over Regulations from Seaboard Corporation (“Seaboard”), acting in concert with Victus Limited (“Victus”), in respect of the proposed acquisition by Seaboard for all the 46.15% of the issued ordinary shares of Unga not already held by Seaboard and Victus as at the date thereof (the “Take-over Offer”).

Seaboard proposes that the Unga ordinary shares will be acquired free from all liens, charges, encumbrances and other interests and together with all rights now and hereafter attaching thereto including the right to receive all dividends and other distributions hereafter declared, made or paid after the date of the Offeror’s Statement.

The terms of the proposed Take-over Offer are that each shareholder of Unga will be offered forty Kenya Shillings (KES 40.00) for each ordinary share of Unga.

According to the Offeror’s Statement, if the Take-over Offer is declared by Seaboard to be unconditional in all respects, Seaboard intends to propose that the shares of Unga be de-listed from the Nairobi Securities Exchange.

 

Seaboard is a vertically integrated conglomerate operating primarily in agribusiness and transportation. In the United States of America (“USA”), Seaboard is currently one of the largest companies engaged in pork production and processing, and also, owns a 50% stake in the largest vertically integrated turkey producer and processor in the USA, Butterball, LLC. Overseas, Seaboard operates in Africa and Latin America through milling operations primarily for commodity merchandising, grain processing and sugar production. Seaboard also has an electric power generation company in the Dominican Republic, a significant Marine division and several agricultural based operations.

Existing Interest of Seaboard in Unga

As at 30 June 2017, the issued share capital of Unga comprises 75,706,986 ordinary shares of KES 5.00 each, all of which are voting shares. Seaboard holds indirectly 2,210,400 ordinary shares of KES 5.00 each in Unga (representing 2,92% of the issued share capital of Unga), currently held as nominee through CFC Stanbic Financial Services Limited, and is acting in concert with Victus Limited which holds 38,557,190 ordinary shares of KES 5.00 each in the company (representing approximately 50.93% of the issued share capital).

Undertakings and persons acting in concert

According to the Offeror’s Statement, Victus, which currently holds a 50.93 per cent majority stake (38,557,190 ordinary shares) in Unga, has irrevocably undertaken to support the Take-over Offer as a concert party and does not wish to increase its present shareholding. Aside from this undertaking, according to the Offeror’s Statement, neither Seaboard, nor Victus, or any related company or person associated with the Seaboard, has received an undertaking to accept the Take-over Offer from any holder of ordinary shares of Unga.

Agreements with directors

According to the Offeror’s Statement, save as regards the irrevocable undertaking of Victus to support the Take-over Offer (as described above), there is no agreement between Seaboard and any director of Unga in connection with or conditional upon the outcome of the Take-over Offer nor is it proposed in connection with the Take-over Offer that any payment or other benefit be made or to be given to any director of Unga or of any company related to it as consideration for, or in connection with, such director’s retirement from office.

Compulsory acquisition and delisting of Unga

As noted above, according to the Offeror’s Statement, if the Take-over Offer is declared by Seaboard to be unconditional in all respects, Seaboard intends to propose that the shares of Unga be de-listed from the Nairobi Securities Exchange.

Unga’s shareholders who do not wish to accept the Take-over Offer and whose shares are not acquired in the circumstances provided in section 210 of the Companies Act (Cap 486) will, in such an event, remain minority shareholders in an unlisted company, thereby limiting the liquidity in the trading of their shares.

Unga shareholders shall at the appropriate time be notified of an extraordinary general meeting of the shareholders to discuss, and if thought fit, approve the de-listing of shares of Unga from the Nairobi Securities Exchange, subject to the Take-over Offer being successful.

The terms and conditions of the Take-over Offer

The terms of the proposed Take-over Offer are that each shareholder of Unga will be offered forty Kenya Shillings (KES 40.00) for each ordinary share of Unga. According to the Offeror’s Statement, the forty Kenya Shillings (KES 40.00) offer price represents a premium, as of 6th February 2018 which was the last business day practicable prior to the submission of the Notice of Intention (the “Value Date”).

The total consideration for the Take-over Offer, assuming Seaboard receives acceptances from all the Unga minority shareholders, is estimated to be approximately KES 1.397 billion. According to the Offeror’s Statement, CBA Capital Limited, Seaboard’s financial advisor and sponsoring broker has confirmed that Seaboard has sufficient resources and facilities at its disposal to satisfy full acceptance of the Take-over Offer.

 

 

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