KenolKobil seeks strategic investor to fund expansion
KenolKobil chairman and group managing director Jacob Segman (third right) chats with guests during an investor briefing at a Nairobi hotel where the firm released its half year results yesterday. Diana Ngilla
Oil marketer KenolKobil is poised to cede a significant stake to a strategic foreign investor to inject cash and ideas to guide its expansion across Africa.
The company Tuesday said it is keen to rope in a major oil dealer to sharpen its competitive edge in a region that is receiving increased interest from multinational oil dealers like Total.
Kenol—which has operations in nine countries mainly in Eastern Africa—is looking to spread its reach in southern and central African markets, an expansion that will require heavy capital investments.
“We have grown big over the years on our own but now we need to bring in a strategic foreign investor to further expand our business on the continent,” Jacob Segman, Kenol’s managing director, told an investor briefing Wednesday without giving details.
The oil marketer did not say whether its top shareholders will cede shares to accommodate the strategic investors or if it will create new shares to tap the high net worth shareholder.
Analysts say major shareholders are unlikely to sell off their stakes in the highly profitable company, arguing that the strategic investor could be accommodated by creating new shares or by going into a joint venture with Kenol.
“The company is undervalued and current shareholders can only sell their stakes by attaching a premium to the share price. A joint venture or creation of new shares is a more probable option,” said Eric Musau, an analyst at Standard Investment Bank.
Wells Petroleum Holdings is the single largest shareholder in Kenol with a 24.9 per cent stake, followed by Highfield (12.4), Chery Holding (8.7), and Energy Resources Capital with 5.99 per cent.
If Kenol creates new shares to accommodate the targeted investors, it will follow the path taken by companies such as Equity Bank and ScanGroup that have benefited from new capital and expertise from strategic investors.
In 2007, PE fund Helios Partners acquired a 24.99 per cent stake in Equity Bank while marketing communication firm WPP took a 27.5 per cent holding in ScanGroup in 2008.
Kenol’s share price stood at Sh11.60 per share on Tuesday having gained 25 per cent in the past 12 months but the firm’s management says the price is low given its strong performance.
The company grew its net earnings by 71 per cent for the year ended December last year on the back of increased sales and higher fuel prices. Its net profit stood at Sh3.2 billion compared to Sh1.9 billion the previous year as sales more than doubled to Sh222.4 billion.
The entry of a strategic investor is expected to give Kenol a bigger financial and technical muscle to grow in the region.
Analysts say Kenol is likely to settle for a multinational oil company that will not only provide the extra capital, but will also offer logistical and strategic input.
The double digit returns seen in Africa is attracting more foreign investors seeking tie-ups with profitable firms on the continent as they turn their backs on developed nations where growth has slowed down on weak demand and sovereign debt crises.
Kenol has over the years funded its regional expansion from its retained earnings and borrowings, focusing on acquiring assets of existing oil companies.
The firm now has operations in nine countries, including Kenya, Uganda, Zambia, Ethiopia, and Burundi, preferring buyouts over starting operations from scratch.
Kenol’s mergers and acquisitions (M&A) manager Patrick Kondo told Business Daily that the oil marketer was targeting Malawi, Bostwana, Angola, Zimbabwe, Namibia, and South Africa in the medium term.
The company already has a trading desk in Zimbabwe but has been frustrated in its bid to set up a retail business there due to ownership rules requiring local investors to hold a controlling stake. Mr Kondo said Kenol prefers to fully own its subsidiaries.
