Scangroup CEO Bharat Thakrar. His stake will drop by 5.4 percentage points on conclusion of ongoing acquisition deal, ceding his clout in the company to the new majority owner, Cavendish. Photo/FILE
What you need to know:
Details of the buy-out deal published in a shareholders’ circular show Mr Thakrar’s stake in Scangroup will diminish to 13.2 per cent, while raising the London Stock Exchange listed WPP Cavendish’ stake to 50.1 per cent.
Mr Thakrar still retains executive powers over implementation of the company’s strategic direction, but WPP will effectively call the shots in terms of voting power and boardroom resolutions.
Cavendish BV jointly owns the subsidiaries in east and west Africa, including Ogilvy Tanzania, Ogilvy Kenya, and Hill & Knowlton East Africa.
Scangroup co-founding shareholder Bharat Thakrar’s stake in the company will drop by 5.4 percentage points on conclusion of the ongoing acquisition deal, ceding his clout in the company to the new majority owner, Cavendish.
Details of the buy-out deal published in a shareholders’ circular show Mr Thakrar’s stake in Scangroup will diminish to 13.2 per cent, while raising the London Stock Exchange listed WPP Cavendish’ stake to 50.1 per cent, effectively giving it majority control of the media services company.
As chief executive of Scangroup, Mr Thakrar still retains executive powers over implementation of the company’s strategic direction, but WPP will effectively call the shots in terms of voting power and boardroom resolutions.
Scangroup’s other shareholders, approximated at 26,000 holding at least 137.2 million shares, will see their collective stake diluted from 48.19 per cent to 36.22 per cent following the transaction.
“Bharat Thakrar, the current chief executive officer and founder-shareholder of Scangroup, will continue to remain the group chief executive officer, a shareholder and a director of the company,” said Scangroup in the shareholder circular issued on Wednesday.
WPP, through its subsidiaries Cavendish and Ogilvy South Africa, already controls 33.616 per cent of the Nairobi Securities Exchange listed Scangroup and is working on acquiring additional stock in a multi-billion shilling share swap and cash deal.
Despite the dilution, Mr Thakrar’s shares in the company will remain at 51.81 million as the transaction involves swaps and the creation of new stock.
Other shareholders will also suffer the dilution, but their nominal stock will remain intact.
Scangroup has convened an extra-ordinary meeting on November 14 in Nairobi to consider the transaction, according to the circular.
In the share swap and cash injection deal, Cavendish BV will acquire 95.7 million newly created shares of Scangroup, offering cash for 21.3 million shares at Sh85.85 amounting to Sh1.8 billion, and cede ownership in nine subsidiaries to Scangroup in exchange for 72.7 million shares.
This values the deal at Sh8.21 billion and values Scangroup at Sh24.44 billion, with the listed firms issued shares increasing from 284.7 million to 378.8 million shares.
Cavendish BV jointly owns the subsidiaries in east and west Africa, including Ogilvy Tanzania, Ogilvy Kenya, and Hill & Knowlton East Africa.
Scangroup announced in the circular that the Capital Markets Authority (CMA) has issued conditional regulatory approvals for both the transaction and an exemption for Cavendish BV from takeovers and mergers regulations.
Cavendish had stated in its offer document in the deal that it did not intend to mount a takeover of Scangroup.
CMA requires investors who own more than a quarter of a Nairobi bourse-listed firm to state whether they intend to take full control of the company when buying stocks equivalent to at least five per cent.
WPP acquired a 27.5 per cent stake in Scangroup in 2008 for Sh1.3 billion. In 2011 it increased its direct stake to 29 per cent after acquiring an additional 10 million shares from Scangroup creative director Andrew White following the expiry of the lock-in period after the firm’s IPO.
Cost-saving measures
The Scangroup board considers that the effect of dilution in shareholding will be offset by a rise in earnings per share. Market analysts say that cost-cutting measures taken in the wake of a drop in first half of 2013 performance should bring a turn-around in the second half.
“Management has undertaken various cost saving measures, including restructuring and consolidation of businesses, benefits of which will accrue in the second half of the year,” said Standard Investment Bank in a note to clients Thursday.
