Britam share hits peak since IPO on rival’s buyout talks

Britam's share yesterday hit its highest level since listing on the Nairobi bourse in July 2011, on buyout news of rival Real Insurance that will nearly double its market share.

The firm’s shares stood at Sh14.75 at the close of trading at the Nairobi Securities Exchange (NSE), compared to Friday’s closing price of Sh13.20 and its IPO price of Sh9.

This pushed the value of its share by Sh3 billion up from Friday’s level of Sh24.9 billion, a boon to the firm’s shareholders including investment banker Mr Jimnah Mbaru, its CEO Mr Benson Wairegi and Equity Bank chief, Mr James Mwangi.

The deal will push its share of Kenya’s insurance market to 7.4 per cent from 4.3 per cent in December, placing the firm behind Jubilee (11.3 per cent), CIC (9.1 per cent) and APA (7.8 per cent).

The company which has interests in insurance, real estate and asset management, disclosed over the weekend of plans to purchase 99 per cent in Real Insurance in a cash and share swap deal.

The buyout will see the principal shareholders of Real Insurance own shares worth hundreds of millions of shillings in Britam—which will also offer them a platform to easily trade in their stocks at the NSE.

Real Insurance says its chair Mr Sam Kamau has a 20 per cent stake in the firm while Mr Joe Kamau Muchekehu, a director, is said to control a significant stake and refers to himself in his Linkedin account as owner of the insurer.

Sources close to the deal reckon that Britam will acquire Real Insurance clients and operational licences in Kenya, Tanzania, Malawi and Mozambique while some of its assets will be detached from the deal and retained by the firm’s parent company—Royal Ngao Holdings.

Real Insurance has assets worth Sh2.7 billion compared to Britam’s insurance arm that has Sh30 billion.

It made a net profit of Sh142.4 million last year, down from Sh162.8 million in 2011, compared to Britam’s Sh1.7 billion.

Britam did not respond to our queries by the time of going to press, but will offer Mr Muchekehu, who also runs an audit firm, and Mr Kamau cash and shares before closing the deal.

The listed firm is yet to issue 259 million authorised shares worth Sh3.8 billion. Britam says the acquisition is informed by its quest to get a larger share of Kenya’s general insurance like car and house and a presence in more African countries.

It has presence in South Sudan and Uganda, but it derives more than 90 per cent of its earnings from Kenya and plans to change this structure in the coming years as the subsidiaries mature.

This means that Real Insurance will give it a presence in Tanzania, Malawi and Mozambique. Real’s general insurance business covers fire, commercial, and motor vehicle risks and had premiums worth Sh2.2 billion last year.

An acquisition provides an easy solution compared to a start-up, which could involve buying land, putting up buildings, hiring local staff, seeking regulatory approval and struggling to fight for market share against established rivals.

This the latest buyout to be pursued by Britam, which on November 14 announced a 25 per cent stake in property development firm Acorn as it races to boost its presence in the real estate market.

Its ambitions to ramp up foreign subsidiaries mirror the rush by local insurers including UAP Insurance, Jubilee Insurance and CIC Insurance to open units outside Kenya.

While Kenya’s insurance market has 45 players, the neighbouring countries have few insurers, attracting more Kenyan firms like Britam.

Britam’s net profit rose 28.7 per cent to Sh2.1 billion in the six months to June, helped by capital gains in its equity portfolio.

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