Britam building situated at Upper Hill in Nairobi. The firm intends to purchase 99 per cent of Real Insurance. FILE
What you need to know:
Britam is targeting to buy 99 per cent of its smaller rival and has proposed to pay 60 per cent of the acquisition amount in cash and issue shares for the remaining sum.
Standard Investment Bank expects Britam to issue between 43.2 million shares and 36 million shares based on the last three months average share price of Sh9.20.
The issue of extra shares will result in a slight dilution of current shareholders.
Real Insurance, which is targeted for acquisition by NSE-listed financial services group Britam, has been valued at about Sh1billion by Standard Investment Bank.
The investment bank analysts used comparable valuations of listed insurers to estimate Real Insurance’s worth.
Britam is targeting to buy 99 per cent of its smaller rival and has proposed to pay 60 per cent of the acquisition amount in cash and issue shares for the remaining sum.
“Our valuation price ranges between Sh1 billion and Sh838 million. This places the consideration for a 99 per cent stake in Real at between Sh994.02 million and Sh830 million,” read Standard Investment Bank’s (SIB) valuation report.
Based on the estimate, the investment bank expects Britam to issue between 43.2 million shares and 36 million shares based on the last three months average share price of Sh9.20. The issue of extra shares will result in a slight dilution of current shareholders.
SIB holds that Britam will comfortably settle the cash amount without seeking debt or altering its investment portfolio given that it was sitting on a cash pile of Sh3.4 billion in June.
Real Insurance may however claim a premium over the valuation price given that the deal will deepen Britam’s regional presence to seven countries.
Real has operations in Tanzania, Malawi and Mozambique; which contributed 42.5 per cent of its gross premiums last year. Britam currently has subsidiaries in Uganda, South Sudan and Rwanda.
The acquisition will also increase Britam’s presence in general insurance business where it ranks eighth with a 4.36 per cent market share. The combined operation will push Britam up the ladder to fifth with a market share of 7.46 per cent.
Real Insurance reported a profit after tax of Sh106 million last year and paid out a dividend of Sh5.33 per share.
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Note: The results are not exact but very close to the actual.
