Pattni sells 15 pc stake in troubled Marshalls E Africa

Businessman Kamlesh Pattni has sold a 15 per cent stake in Marshalls East Africa months after gaining control of the loss-making auto dealer from his business rival Ketan Somaia.

Details in the auto firm’s latest report show that Mr Pattni’s stake dropped to 50.57 per cent as at March compared to 65.57 per cent in a similar period last year — earning the controversial businessman more than Sh30 million.

Data from the Nairobi Securities Exchange (NSE) show that the share sales—estimated at 2.1 million happened in large blocks late last year of between 200,000 to 325,000 shares for counter that goes for days without witnessing trading.

These block sales could only be done by Mr Pattni under Marshalls Investments Limited and the number two top shareholder Woodside Limited since the number of shares held by other top shareholders ranging from 450,000 and 150,000 remained unchanged.
Woodside shares of about 1.9 million remained unchanged — a pointer that the block sales were done Marshalls’ largest shareholder: Mr Pattni.

Marshalls’ new chief executive Sanjiv Shah declined to comment on the changing shareholding structure that is set to trigger concerns that its anchor is not confident of its turnaround efforts.

The sale saw new investors emerge on its top 10 shareholder list with the ranking of top-three owners remaining unchanged — a signal that Mr Pattni either sold his shares to seven different investors or fewer that opted to put their holdings in different vehicles.
Woodside Limited and Mr Kirtesh Shah remain the second and the third largest shareholders with 13.36 and 3.28 per cent stakes respectively.

The deal happened barely a year after Mr Pattni wrested the firm back from business adversary Mr Somaia, who had since 2006 been fighting for control of the firm’s boardroom and executive suite.

Mr Pattni has insisted that he bought a controlling stake in Marshalls, arguing that Mr Somaia had refused to transfer the shares to him, a contest that played out in the firm’s AGM as the warring shareholders held parallel meetings.

The shareholder spat saw Marshalls end up with six CEOs in three years, a turnover that has hampered the firm’s ability to develop long-term strategy and hire top talent in the increasingly competitive auto sector.

Besides the board wrangles, a thin product line and sluggish sales in Kenya’s new vehicle market has helped rivals such as General Motors, CMC and Toyota grab its market share, which has seen its sales fall and a deepening of losses since 2007.

It lost the Peugeot franchise in 2007, ending the 47-year partnership Marshalls had with the France-based firm.

Investors have taken notices as its shares have become the least sought after at the NSE and goes for weeks without trading, including yesterday.Its share price stood at Sh12.25 on Friday, having shaved off 13 per cent over the past year and has gained 7.5 per cent in the past three months, mainly due to non-trading.

Marshalls East Africa is betting on luxury and commercial trucks market with new models from Ashok Leyland, Audi and Force Motors to return to profitability.

It’s also counting on new executives -- salesmen Michael Harrison and Navroze Adam who handles after-sales and parts departments-- to grow its market share that stands at less than five per cent.

The auto firm recorded a net profit of Sh181.5 million in the year to March compared to a loss of Sh344 million in similar period last year in spite its sales dropping to Sh263 million from Sh604 million and Sh1.3 billion in 2007.

This was helped by the waiver of a Sh401 million loan borrowed from KCB by Mr Somaia that directors and executives friendly to Mr Pattni successfully went to court and argued that the loan was issued irregularly when Marshalls did not have a board to approve the monies.

The firm reported a net loss of Sh319 million excluding the one-off loan waiver—extending its loss-making streak to four years.

The loan, which was borrowed in 2006, had grown to Sh808 million at the end of March 2010 and Marshalls provided Sh469 million as an expense on its books pending the outcome of the court case.

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