Britak’s share auction mints billions for lead owners

The Nairobi Stock Exchange, whose position as one of Kenya’s most preferred investment platforms has come under serious attack in recent months, could give the country the latest crop of billionaires with the rollout of this year’s first public share auction in two weeks time.

Principal shareholders in British American Investment Company (Britak) stand the chance of coming out of the company’s public listing with handsome amounts of money that analysts expect to match the change in fortunes that Equity Bank brought its initial shareholders upon its listing at the NSE in 2006.

The pricing of the Britak offer at Sh9 per share has, for first time revealed the worth of an elite group of the firm’s top owners to whom public listing offers the chance to harvest part of the investment.

Top in the list of paper billionaires are Peter Munga, the businessman who chairs Equity Bank board, Jimnah Mbaru, the investment banker, Equity Bank chief executive James Mwangi, Jane Michuki, a managing partner at Kimani & Michuki Advocates and Dawood Rawat, a foreign national.

The opening of the share sale on July 12, offers this crop of investors an opportunity to offload part of their stocks and to make capital gains on the remaining portion in the event of a share price rally in subsequent months.

Any key shareholders who decides to sell part of their stocks will reap millions of shillings in a feat only comparable to the windfall that initial shareholders reaped after Equity Bank’s debut at the stock market in 2006. It was Equity’s listing that turned the likes of James Mwangi and the late Nelson Muguku into billionaires through a mix of share price rally punctuated by share splits and bonus issues.

Mr Rawat, a Mauritian national, who chairs Britak’s parent company, owns 385.5 million shares valued at Sh3.4 billion, making him the wealthiest of the company’s principal shareholders.

Capital Markets Authority (CMA) – the market regulator – has allowed him to sell up to 103 million shares within the first two years of the IPO, a move that could earn him up to Sh933.3 million at the IPO price of Sh9 per share.

Mr Munga, the businessman who together with James Mwangi made his first billion at Equity Bank, is the second largest shareholder with 345.1 million shares held directly and through separate entities that own shares in Britak.

His total portfolio in the investment firm is worth Sh3.1 billion offering him the chance to immediately harvest Sh725 million from the sale of 80.5 million shares.

Mr Mbaru – the principal shareholder at Dyer & Blair Investment Bank— owns 300 million shares at Britak valued at Sh2.7 billion and could pocket at least Sh726 million should he sell 80.7 million shares allowed by the CMA in the first two years.

Mr Mwangi and his wife, Jane Wangui, control 120 million shares worth Sh1 billion at Britak and could harvest up to Sh586 million from the sale of 60.1 million shares or half of their holding.

Last year, Mr Mwangi sold 28 million Equity Bank shares for Sh600 million, in a move he said was to bring him in compliance with the regulatory requirement that his stake in the bank must remain within five per cent limit.

Ms Michuki, a lawyer who was part of the legal consortium that advised Equity Bank during its IPO in 2006, has 179.8 million shares valued at Sh1.6 billion at Britak and could earn Sh255.3 million from a potential sale of 28.3 million shares at the IPO price. She became a minority shareholder in the bank in 2004 after participating in a private placement.

With Mr Munga, Mr Mbaru, Mr Mwangi and Ms Michuki positioned as potential top beneficiaries of the public listing, the Britak IPO has the hallmarks of a repeat windfall for those who benefitted the most from Equity’s public listing and the subsequent share price rally in the past four years.

The IPO prospectus indicates that CMA has locked in the principal shareholders to owning at least 51 per cent of the company for two years from the date of listing at the Nairobi Stock Exchange.

“These shareholders cannot reduce or have their individual shareholding reduced by more than the amounts set out during the aforesaid two year period,” the prospectus says.

Britak, which was incorporated in the Bahamas – a string of islands in the Atlantic Ocean – launched operations in Kenya in 1965 before it was incorporated locally 14 years later.

The Kenyan investors were initially allowed to acquire a 33.3 per cent stake in the firm in 1984 with the change in capital markets regulations. In 2006, local investors acquired an additional 30 per cent stake in the company whose portfolio had expanded to include insurance, and wealth and asset management under British American Asset Managers (BAAM) – a subsidiary.

Britak is selling 30.23 per cent stake to the public in the planned share auction from which it hopes to raise Sh5.8 billion to finance a rollout of new products and expansion into Tanzania, Rwanda, and Southern Sudan.

The firm also plans to spend Sh2.5 billion of the IPO funds to deepen its foot print in the booming property market.

Analysts said the opportunity that public listing offers Britak’s key shareholders, whose long term bet on a number of companies in the past has paid off handsomely, is the latest reaffirmation of share ownership in modern corporations as the surest way to multiplying ones wealth in Kenya.

The near similarity of principal shareholders at Britak and those who originally owned Equity has however unveiled the complex relationship between the two firms.

Mr Munga holds 75 million shares under his name and the rest through his shareholding in Filimbi and Equity Holdings – two entities that hold Britak shares and he co-owns with Jane Wangui (Mr Mwangi’s wife) and Jane Michuki respectively.

The closely knit club of less than 20 investors has spread its tentacles to other listed companies through cross-ownerships and allowed them a presence in the boardrooms of many companies.

Benson Wairegi, 58, another top shareholder with a 6.63 per cent stake in Britak is the group’s managing director and is also a non-executive director at mortgage lender Housing Finance (HF) where Britak has a 7.5 per cent stake.

Mr Munga, 67, is a non-executive director at Britak which has an 11 per cent stake in Equity Bank where he serves as chairman. Equity in turn holds a 24.9 per cent stake in HF making it the single largest shareholder in the mortgage firm.

Mr Mwangi, 48, is the chief executive of Equity Bank and also sits in Britak’s board as a director.

Last year offered a glimpse of the discomfort the cross-ownerships are causing in corporate Kenya as Britak and Equity Bank teamed up to oust HF’s long-serving chairman Kung’u Gatabaki as they tightened their grip on the mortgage lender’s board.