Kenya: How Minority Shareholders Have Scuttled Takeover Bids At NSE

Kenya: How Minority Shareholders Have Scuttled Takeover Bids At NSE

The failure of two takeover bids of Kenyan companies in July, the first of its kind, has illustrated the growing influence of minority shareholders in the running of listed companies.

Minority shareholders who have long been dancing to the tune of major shareholders, now have a voice in major decisions affecting the operations of their companies, including transfer of ownership, raising of new capital and business restructuring, thanks to new laws that give them powers and protection from dominant shareholders.

Kenya became the first country in the region to witness failed takeovers after minority shareholders of listed logistics firm Express Kenya and flour maker Unga Goup Plc refused to sanction the deals due to poor pricing.

This could mark a turning point for minority shareholders who, in the past, have watched in despair as their investments went down the drain due to bad business practices and poor corporate governance attributed to majority shareholders.

"The directors of companies should listen to what the minority say. It is important that their voices are heard because they are many and even if they do not have the voting power, they have the numbers," said Job Kihumba, executive director in charge of corporate finance at Standard Investment Bank.

Hector Diniz, chief executive of Express Kenya, had bid to buy the troubled firm, but the deal turned sour after he was unable to gather the support of the minority shareholders to increase his shareholding from 61.64 per cent to at least 75 per cent.

Mr Diniz had hoped to acquire the 38.36 per cent stake owned by minority shareholders, but a number of them rejected the offer, reckoning that the firm could fetch much more based on the value of its 15.7 acres in Nairobi’s Industrial Area, compared with the acquisition price of Ksh5.50 ($0.05) per share.

If the deal were to go through, Express would have been delisted from the Nairobi Securities Exchange.

Means of redress

Another failed takeover bid involved Unga Group and the American firm Seaboard Corporation.

Seaboard, a global food, energy and transportation firm, had expressed confidence that its offer to buy the minority shares in Unga Group with the objective of eventual delisting from the bourse would bear fruit.The firm sought to buy out the 46.15 per cent shares held by minority shareholders at a price of Ksh40 ($0.4) per share.The bid failed after the minority shareholders released only 16.05 per cent of their shares, saying that […]

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