Treasury set to sell a portion of Portland Cement shares

The Treasury may sell off some of its shares in East African Portland Cement Company to comply with the regulations which require that listed firms have at least 25 per cent of their shares available for trading by the public.

A Government taskforce set up in August last year noted that only six per cent of cement maker’s shares were available for trading by the public.

“EAPCC should comply with the provisions of the CMA Act by increasing the publicly traded shares to the requisite threshold,” said the taskforce in recommendations seen by the Business Daily.

The taskforce was appointed to review the State Corporations Act and bring it in line with provisions of the new Constitution.

The Treasury directly holds 25.3 per cent shares of EAPCC while the State-controlled retirement fund NSSF owns 27 per cent of the cement maker.International cement conglomerate Lafarge has a 41.7 per cent stake in the firm.

The Government had already hinted at the impending sell-off in EAPCC’s 2011 annual report.

“In regard to planned Government divesture from EAPCC, the board wishes to assure all shareholders and stakeholders that our company’s status quo remains intact until the planned divesture comes to its logical conclusion through government procedures,” said the board.

The taskforce also recommended that EAPCC should “immediately cease operating as a State corporation.” The cement firm has been categorised as a parastatal by virtue of the combined shareholding of the Government and NSSF.

The Capital Markets Authority’s 25 per cent rule was introduced in 2002. Portland Cement and other firms that had been listed when the rules were being introduced were not affected by the rules, but were encouraged to work towards increased public ownership.

Analysts said the Treasury or the NSSF were the most likely to sell off their shares for compliance with the CMA requirement as Lafarge is a private entity.

“It would be hard to compel Lafarge which is a private investor to sell,” said an official who requested anonymity as he did not want to appear to be communicating the official position on the matter.

Either all or some of the shareholders would have to release some shares but the Government was more inclined following the recommendations.
The aim of the rule was to promote liquidity of listed stocks instead of having few shareholders who rarely entered the market.

Some of the most liquid shares in the Nairobi Securities Exchange include Safaricom and Equity Bank which have many retail holders.

Other listed companies that enjoy exception to this rule include Total Kenya, where the parent firm Total has more than 83 per cent stake.

NSSF looks set to shed some of its stake having already stated intention to sell four per cent of its holding to an employee pension programme.