Tatu City ownership battle starts after 8-month delay
An artist’s impression of the proposed Tatu City project. File
Shareholder wars in the multi-billion Shilling real estate firm, Tatu City, take a potentially decisive turn this week when the High Court opens its hearing of petitions that could for the first time reveal the real value of the company’s assets and see the exit of one of the founding directors.
Mr Stephen Mwagiru, a founder director of Tatu City Limited, faces off tomorrow with industrialist Vimal Shah, former Central Bank of Kenya governor Nahashon Nyagah and the managing director of Russian investment bank, Renaissance, Mr Chris Baxter, in a legal battle that should also clear the way for work to begin on the 14,000- acre project.
The multi-billion Shilling real estate development plan that was launched with fanfare last October has been mired in a web of legal suits filed by its directors over its ownership. The tussle began in earnest on November 5, after Mr Mwagiru filed a petition in court seeking to dissolve the company on grounds that co-directors had excluded him from participating in the management of its affairs.
That petition was met by a swift response from the other directors who filed a separate suit accusing Mr Mwagiru of disobeying court orders and acting in bad faith by failing to comply with the law relating to the winding up of companies.
Mr Mwagiru’s partners in Tatu City have also filed a forgery suit against him for allegedly filing in court falsified titles indicating that he and his mother Rosemary Mwagiru are the only bona fide directors of the firm.
Mr Mwagiru moved to the Constitutional Court to challenge the decision to charge him with a criminal offence in a civil matter. The case is due to be heard on July 17.
Fresh petition
Tuesday marks the start of proper hearing of the Tatu City ownership dispute after the warring parties agreed to join all the petitions – save for the one before the Constitutional Court -- in one suit.
Mr Mwagiru has, however, filed a fresh petition seeking the appointment of an interim liquidator to manage the company’s assets as the court hears the dispute -- a petition his co-directors through a Nairobi law firm, Oraro & Company Advocates, have dismissed as frivolous and lacking in merit.
“The application is made for ulterior purposes, mainly to create an avenue for adverse publicity and prejudice the business of the company,” Mr Oraro told the Business Daily on Friday.
Mr Mwagiru justifies the petition, filed under a certificate of urgency, on grounds that he has been denied participation in management of the company, and that his partners have continued to sell the company’s assets, exposing him to the risk of suffering irreparable losses.
He also accuses the majority shareholders of cutting down trees and selling timber to Kenya Tea Development Authority factories.
“The directors in office cannot, on the evidence stated in the supporting affidavit to the application thereof, be entrusted any longer with the preservation of the assets of the company and there is, consequently, an urgent need to appoint interim liquidators to take care of the said assets and who will be answerable to the official receiver, the court and all other interested parties, pending the disposal of the petition,” says Mr Mwagiru in the court papers drafted by P.M. Wamae and Company Advocates.
In the petition filed on June 3, Mr Mwagiru has expressed his intention to exit Tatu City over what he terms irreconcilable differences with his fellow shareholders, but says the move has been complicated by differences over the size of his stake and the real worth of the company.
Attempts by the majority shareholders to buy Mr Mwagiru’s interest in the company have failed as he has insisted on an independent valuation of the firm as a pre-condition for such a buy-out, estimating that Tatu City’s assets are currently valued at Sh78.6 billion.
In one such buy-out attempt Mr Mwagiru says Mr Baxter, who represents the majority shareholders, had offered him 1,184 acres of land being 10 per cent of the estimated 14,214 acres owned by Tatu City, but he declined the offer.
Mr Mwagiru- who jointly with his mother, claims to own 14.5 per cent shares of the company, deemed this to be an undervaluation of his stake.
“We estimated the land offer to be worth Sh2 billion, but the said offer was arbitrary with respect to the level of our shareholding,” argues Mr Mwagiru
He claims again that in February this year, he met Mr Baxter at the Muthaiga Golf Club to discuss how to resolve the disputes, but he never heard again from him despite a promise that he would revert after discussing his demands with other shareholders.
At the centre of the Tatu City ownership dispute is the size of Mr Mwagiru’s stake which the parties have fixed at different levels in documents filed in court making it difficult for the minority shareholder to exit the company on agreeable terms.
Mr Mwagiru claims he has an 11 per cent shareholding in the company and has produced emails exchanged with Renaissance directors on the same, but court documents filed in response to his winding up petition last November show that the seven Kenyan shareholders transferred their interest to the Russian investment bank as a security for a $62.5 million (Sh5 billion) loan meant to kick-start the real estate plan.
Mr Mwagiru’s co-directors say Renaissance Partners Investment Limited arranged the credit facility from a consortium of international banks in a deal it also backed up as a guarantor and accuse him of seeking to abandon the project mid stream in an attempt to avoid paying his share of the loan.
“As part of security for the facility, all shareholders including Stephen Mbugua Mwagiru, agreed to charge their shares in favour of Renaissance Partners Investment Limited,” says documents filed court.
The directors own 14,214 acres of land spread across Ruiru, Thika and Juja - part of which is to host Tatu City. Court documents list Cedar IV Limited - a fully owned subsidiary of Renaissance Group - as the 99.99 per cent owners of Tatu City Limited, leaving Mr Mwagiru and his mother with one share each.
Like Mr Mwagiru, the other shareholders, including Mr Nyagah, Vimal Shah, Dipak Shah, Bhimji Shah, Judith Nyagah, and Tarunkumar Shah, have a single share each in the firm.
It is not clear from the documents how Renaissance Capital valued Mr Mwagiru’s interest in the company at 10 per cent in an e-mail dated September 3.
Joint venture
If granted, Mr Mwagiru’s latest petition could put at stake capital contributions of up to Sh1.8 billion ($20.8 million) that the shareholders raised for the purchase of prime land for the project.
Renaissance Capital is the majority shareholder in the joint venture having contributed Sh928.8 million ($10.8 million) to the company. The local shareholders together contributed Sh860 million ($9.9 million) to the firm.
Through Oraro and Company Advocates, the majority shareholders term the application as an abuse of the court process intended to delay the court process.
“There are prior applications by the petitioners which have been certified as urgent and are not yet heard and the petitioners cannot continue making a multiplicity of applications without leave of the court.” The company has sought approval from the National Environmental Management Authority (Nema) to roll out phase one of the project in a gazette notice published on May 27.
