Dubai dealer demands board seats before CMC takeover

The board of CMC Holdings is set for a shake-up after a Dubai firm seeking to buy the auto dealer sought the resignation of the current directors before closing the deal.

Al Futtaim said one of the conditions of the acquisition is the resignation of CMC’s directors five days before the close of the offer period, which is yet to be made public.

“If required by Al Futtaim, CMC procuring letters of resignation, at least five days before the offer period closes, from some or all the directors of CMC,” Al Futtaim said in an offer statement.

The Dubai firm added that the advance resignations will allow it to restructure CMC’s board immediately it receives approvals from the company’s shareholders controlling at least 75 per cent stake.

Fulfilling the condition will give Al Futtaim full control of the auto dealer’s board after the transaction, with the multinational appearing open to retain a few of the current nine-member board.

Al Futtaim has offered to acquire CMC at Sh13 per share, which is four per cent lower than the company’s last trading price of Sh13.5. The Dubai-based firm said acquisition of CMC will help it to expand into the local and regional auto market.

(READ: Dubai Al-Futtaim Group bids Sh7.5bn for CMC Holdings)

The buyout will see CMC investors unlock the value of their shares that have remained suspended since September 2011.

CMC’s chairman Joel Kibe on Friday told the Business Daily that he will retain his position after the buyout, adding that Al Futtaim is free to engage with other directors individually.

“I will remain as chairman. I cannot speak for other directors,” Mr Kibe said.

Other directors include Mary Ngige (acting CEO) and Paul Ndung’u — a significant shareholder in CMC and a business associate of Mr Kibe’s.

Mark Karbolo and Kyalo Mbobu were recently appointed as directors by CMC’s top shareholder Peter Muthoka, following his ouster and that of his business associate Joseph Kivai from the auto dealer’s board in March last year.
Naftali Mogere is another new appointee representing the interests of former CMC chairman Jeremiah Kiereini whose previous nominee Richard Kemoli also resigned last March at the height of the auto dealer’s boardroom wars.
The Capital Markets Authority (CMA) also has three appointees in CMC’s board, with their entry in March last year causing the displacement of Mr Muthoka, Kivai and Kemoli.
The CMA’s appointees are Ms Zehrabanu Janmohammed, Joshua Okumbe, and Susan Wakhungu-Githuku. CMC’s boardroom has had the highest director turnover among firms listed at the Nairobi bourse.

A total of eight directors have left the company’s boardroom since March 2011, with the departures linked to a long-running boardroom war that ended in February after the feuding major shareholders struck a truce.

The bitter boardroom war had pitted Mr Muthoka and Kiereini on one side against Mr Kibe and Ndung’u, with CMA stepping in to investigate allegations from both sides about poor corporate governance and financial impropriety at the auto dealer.

Mr Kiereini and former CEO Martin Forster left CMC in March 2011 within weeks of each other, setting the stage for the exit of Charles Njonjo, Andrew Hamilton, Ashok Shah and other directors in subsequent months.

Mr Ndung’u is the longest serving director at CMC, with all the others having been appointed from 2011.