On Tuesday, the oil marketer came out to reassure the market that its takeover by Swiss firm Puma was still on and noted the concern of investors over the red ink.
“We note the concern expressed by investors in relation to the recently announced operating loss,” said a statement signed by group chief executive Jacob Segman.
KenolKobil share price fell to a three-month low as mostly retail investors headed for the exit, forcing the firm’s market capitalisation to drop to Sh19.28 billion from Sh22.22 billion.
Kenya’s largest oil marketer’s share price dropped to Sh13.10 from Sh15.30, a 13 per cent drop, after the crucial announcement which saw 3.3 million shares traded since Monday, most of them sold by local investors.
“Majority of the shares (53 per cent) was disposed of by local investors,” said a Tuesday market report by Dyer and Blair Investment Bank.
Analysts said the drop was expected since investors had to factor in the loss in the pricing, but the reaction was not replicated by large shareholders who are holding onto their stakes until the deal with Puma Energy is finally sealed. “Most of the large shareholders still held out and believe that the deal is still going on,” said Eric Musau, a research analyst at Standard Investment Bank.
The 2011 KenolKobil annual report shows that the three largest shareholders — Wells Petroleum Holdings Limited, Petro Holdings Limited, and Highfield Limited — have a combined 54.71 per cent stake leaving a relatively small float in the market.
KenolKobil’s management said it was confident that the deal with Puma Energy would proceed, backed by the oil marketer’s large shareholders.
In May KenolKobil announced that major shareholders had signed an exclusive deal to sell shares to Puma Energy which would result in a takeover, adding to a slew of such deals that have taken place in the Kenyan market over the last decade.
On Tuesday, in a cautionary statement, KenolKobil said Puma Energy should finish due diligence by the end of the month after which it would apply to the Capital Markets Regulator to takeover and state the offer price.
A May report on the firm by Kestrel Capital had forecast that should Puma Energy get approvals from the Energy Regulatory Commission and meet the take-over rules, the deal could be concluded by end of the month. “Assuming that regulatory approvals are obtained in a timely fashion, we expect that a full take-over could be effected as early as September 2012,” said the note.
Analysts at the time had said that the deal would result in a share price appreciation driven by speculation.
“This is expected to cause a significant increase in the stock’s price,” said Sterling Capital at the time.
Interestingly, this was actually the case until the announcement of the loss which has clearly spooked the market.
Rising share price
The share price had been rising from Sh12.50 on May 7 when the proposed deal was announced, to the current Sh13.10 price.
KenolKobil says that should the deal with Puma Energy go through, it will reduce the cost of financing which was a major cause of the half-year Sh3.9 billion loss, a fact that could have calmed the bigger shareholders.
The firm increased borrowing by 40 per cent, at a time when interest rates were high, resulting in the loss. High borrowing rates saw the finance costs rise by 253 per cent to Sh1.136 billion from Sh448 million.
Lowering finance costs is a benefit the Puma Energy deal is expected to provide KenolKobil.
“Management foresee substantial benefits crystallising upon closing of this deal, mainly in the area of inventories management, forex exchange risk, cost of financing, and better sources of products for the whole group,” said the firm.
