Sameer to spin off tyre subsidiary in Sh1bn deal

Sameer Africa is set to spin off its tyre production unit from the group in a re-organisation of the company to facilitate the entry of a new strategic shareholder.

The Nairobi Securities Exchange (NSE)-listed Sameer Group is involved in both tyre manufacturing and investments in property.

Sameer chief executive Allan Walmsley says the group has identified a strategic investor who will buy about a 50 per cent stake in the tyre-making unit. The deal will see the manufacturer get a cash injection of over Sh1 billion to finance the purchase of new machinery.

“We are creating a separate legal entity in which we are offering a maximum of 50 per cent equity to the technical partner in exchange for more than Sh1 billion in cash,” said Allan Walmsley, Sameer’s chief executive.

The new shareholder will also be expected to offer technical advice to Sameer, replacing Japanese multinational Bridgestone which sold its stake in the business last year.

The decision to spin off the tyre unit is aimed at simplifying the transaction besides allowing the partners to focus on this line of business, said Mr Walmsley.

“The new investor will help us upgrade our factory to gain economies of scale and ultimately price advantage in the regional market,” he added.

The unnamed investor is expected to be an Asian tyre manufacturer as per an earlier announcement.

Sameer terminated its partnership with Bridgestone last year, accusing it of inadequate technical and sales support.

This saw Bridgestone sell its 14.9 per cent stake in the Nairobi Securities Exchange-listed firm for Sh207.4 million to Sameer Investments Limited (SIL), a company associated with billionaire Naushad Merali.

This pushed SIL’s ownership in Sameer to 72.15 per cent from the previous 57.25 per cent. The 14.9 per cent was to be held temporarily by SIL before being sold to a new partner, a move that would have replicated the arrangement with Bridgestone.

READ: Bridgestone exit to pave way for new Sameer investor

The strategy has however been revised with the move to spin off the mainstay tyre business in which the new investor will buy the stake of up to 50 per cent.

Tyre manufacture and distribution is Sameer’s biggest business, accounting for 97.1 per cent and 76.6 per cent of sales and net earnings respectively last year.

Commercial properties account for the rest of the business. Sameer is the sole-owner of the Sameer Industrial Park and Sameer Export Processing Zone. It also has a 25 per cent shareholding in Sameer Business Park that leases space to banks and other retailers.

Sameer is looking at the upcoming partnership to boost the performance of its tyre business, a move that will see it take on cheaper imports from Asia that have eaten into its market share.

Cheaper tyres from India, China, and other low-cost markets have increased their local market share to 50 per cent from the previous 45 per cent, riding on demand from price-sensitive consumers.

Besides the technical partner, Sameer has also signed a distribution deal with Chinese tyre firm Qingdao Nama Industrial to reduce reliance on its Yana and Bridgestone brands which it continues to sell.

The tyres sourced from the Nama deal will be sold under the Summit brand and the first shipment is expected in August.

Sameer’s net profit in the year ended December more than doubled to Sh401.1 million, helped by the sale of a two-acre land along Mombasa Road for 297.5 million.

It made a gain of Sh255 million from the land sale, which helped to boost earnings as operating profit before tax remained unchanged at Sh1 billion.