The Competition Authority of Kenya (CAK) has approved Car &General’s proposed re-acquisition of a 50 percent stake in diesel engine distributor Cummins C&G Limited (Cummins CG) that it had ceded to franchise US owner in 2017.
The Nairobi Securities Exchange-listed trading firm announced the intention to buy out CMI Africa Holdings BV (Cummins BV) from the jointly held subsidiary in February this year.
C&G sold its stake in Cummins CG to the franchise US owner Cummins Inc in 2017, fetching Sh412 million, to form the joint venture.
At the time, C&G had decried increased competition from rival equipment manufacturers and dealers.
While granting approval to the deal, CAK noted that the transaction is unlikely to negatively impact competition in the market for power generators and engines, as well as the market for filtration equipment and coolants.
This market, the regulator said, is expected to expand in coming years due to rising demand from upcoming special economic zones, manufacturing industries, business parks and the telecom sector, which will together raise demand for power.
“With regard to the proposed merger, the transaction is not expected to raise competition concerns post-merger since it is an increase of shareholding by the acquirer in the target. Therefore, the market structure and concentration will be unaffected,” said the CAK.
“As per the parties’ submissions, this transaction will not elicit negative public interest concerns. Specifically, regarding employment, the target’s 67 employees will retain their employment under the same terms.”
Following the completion of the deal, Cummins CG will operate as a wholly owned subsidiary of C&G as well as an authorised Cummins distributor in the Eastern African region.
C&G, whose business spans poultry farming and real estate, was appointed Cummins’ diesel engines, turbochargers, alternators and generators distributor in 2006.
The latest proposal is, therefore C&G’s game plan to regain its status as the sole owner of the engines and generators distributorship.
The company has been on an expansion drive recently as it looks to bolster its bottom line, opening a helmet manufacturing plant last year as part of its diversification plan that has seen it venture into real estate and consumer credit, in addition to motorcycles and tuk-tuks, among others.
Its net profit for the full year ended September 2022 dropped by 23 percent to Sh679.46 million due to higher debt service costs.
