State Kwal share deal gifts Centum huge value jump
Privatisation Commission CEO Solomon Kitungu. FILE
What you need to know:
In its 2012 annual report Centum had attributed a profit of Sh35.6 million to Kwal, which placed the agency’s total profits at approximately Sh137 million.
Valuation of Centum Investment’s stake in Kenya Wines Agencies Ltd (Kwal) rose 352 per cent following the fixing of its worth at Sh860 million in a State deal with South African Distell. The government sold a 26 per cent stake to the South African company last week in a transaction meant to secure the future of the wine agency.
Centum, formerly ICDC Investment, has an equal 26 per cent stake it had valued at Sh190 million two years ago. The Treasury-owned ICDC ceded its shareholding to Distell, despite Centum being the second largest shareholder, on condition that Distell continues contracting Kwal as its production and distribution agent in Kenya for at least five years.
“All parties agreed on the need to undertake the restructuring phase by ICDC selling the shares to Distell,” said the chief executive of the Privatisation Committee Solomon Kitungu in response to whether Centum had a first right of refusal to buying the stake. Attempts to contact Centum CEO James Mworia for comment were unsuccessful.
In its 2012 annual report Centum had attributed a profit of Sh35.6 million to Kwal, which placed the agency’s total profits at approximately Sh137 million.
Distell had in 2012 threatened to end its 14-year partnership with KWAL – also owner of duty free shops in Kenya and Rwanda – and manage its brands locally in a move that would have hit the agency hard.
Competitive market
Distell felt that it was losing in the highly competitive market of wines and spirits due to the government’s failure to support Kwal’s ambitions. Kwal had to go to court to stop the divorce but an out-of-court settlement gave the government time to appoint a privatisation board and close the deal.
The government-owned distiller is heavily reliant on bottling and distributing Distell’s products such as Viceroy, Amarula, Castle Brand Aperitif, Drostdy-Hof and Cellar Cask, which contribute approximately 60 per cent of its sales to stay afloat.
Some of KWAL’s strong brands include King Fisher, Kibao Vodka and Hunters Choice.
“Distell’s wealth of experience in the ciders, spirits and wine segments will bring new capabilities to Kenya Wines Agencies and increase its competitive position, unlocking and creating significant value,” said Distell Group CEO Richard Rushton.
The Treasury is now left with 46.65 per cent holding in the company.
