Coffee firm’s takeover by rival gets Treasury go-ahead

Treasury has cleared the planned takeover of Socfinaf Limited by rival coffee firm Waguthu Holdings (K) Limited, setting the stage for new competition in the industry.

“In exercise of powers conferred by section 31 of the Restrictive Trade Practices, Monopolies and Price Control Act, I authorise the takeover of Socfinaf Company Limited and Eaagads Limited by Waguthu Holdings Kenya Limited,” Finance minister Uhuru Kenyatta said in a gazette notice on Friday.

Also approved was the proposed acquisition of the entire business, assets and liabilities of micro-finance firm, Jamii Bora Kenya Limited, by Citi Finance Bank Limited and the planned takeover of Diagnostic Imaging Clinic and Diagnostic Centre Kenya Limited by Aga Khan Health Services Kenya.

The coffee firms had in December disclosed the takeover plans following a deal between Waguthu Holdings (K) Limited, incorporated in Kenya as WHL, and Manhattan Coffee Investment Holdings, incorporated in Mauritius as MCIH, which jointly exercised an option granted by Intercultures SA incorporated in Luxembourg and Socfinaf Company Limited that is incorporated in Kenya.

“By agreement dated December 10,2009 MCIH has agreed that the sale and purchase of the Socfinaf shares should be completed and be held by WHL, a company in which MCIH and others own a controlling interest,” the companies said in a joint statement on December 11, 2009.

Socfinaf is the holder of 9.9 million ordinary shares of Sh1.25 each in the issued share capital of Eaagads Limited representing approximately 62 per cent of the issued share capital of Eagaads.

“Upon completion of the transaction, WHL, indirectly will acquire effective control of Eaagads. But WHL does not wish to make a take-over offer for Eaagads pursuant to the regulations and accordingly intends to apply to the Capital Markets Authority (CMA) for an exemption under regulation five,” they further said.

The companies, however maintained that Eaagads’ listing on the alternative investment segment of the Nairobi Stock Exchange (NSE) would be upheld.

“The reason for the exemption application are that as a result of the transaction the percentage of the shares held by the Kenyan public will be better served by maintaining the listing of Eaagads on the NSE,” they said noting that conclusion of the deal would be subject to approval by the Finance minister.

With Mr Kenyatta’s approval having finally come through, it means that the planned takeover of Socfinaf would now proceed with analysts pointing out that the move was likely to trigger new turf wars in the coffee industry now that Socfinaf enjoyed a market share of about eight per cent.

Besides, the company has had its products certified by international brands such as UTZ, raising its stakes in the markets.

UTZ evaluates producers on a pedestal of social, economic and environmental criteria for responsible coffee growing practices and efficient farm management, which often guarantees higher prices.

Such certifications give growers opportunity to make production sustainable.

Other players in the production and supply chain such as roasters also find the advantage of tracing the quality of supplies from the cup back to the farms.

Apart from UTZ there are other international certification programmes active in Kenya include the Rainforest Alliance and Fairtrade even though they have, on several occasions, been criticised for their expensive audit that locks out small-holder farmers.