How failed takeover attempt sparked Britam, Acorn fight

Britam’s unsuccessful push for a majority stake in property firm Acorn Group sparked the vicious multi-billion shilling court fight with the real estate developer, court documents reveal.

Acorn chief executive Edward Kirathe traces the roots of the falling out to his rejection of proposals made by Britam managing director Benson Wairegi between May and July this year for the Nairobi bourse-listed firm to increase its stake in Acorn.

Britam bought a 25 per cent stake in Acorn in November last year and was said to have been keen on getting a majority stake in the property firm whose client list includes top firms like Coca-Cola East Africa, Deloitte East Africa and Equity Bank.

“Once Britam realised that Acorn was not willing to accede to Britam’s demands that Acorn sell or trade shares to enable Britam acquire a larger equity interest, Britam orchestrated a deliberate plot to arm-twist Acorn by unilaterally stopping funding,” Mr Kirathe said.

He says that Britam decided not to honour terms of their shareholding agreement including providing land and cash for property development, throwing into uncertainty a number of real estate developments that were at the formative stage.

Britam started crafting its own real estate plan that was slowed down by the exit of four senior executives in the firm’s property division and who later formed a private equity fund, Cytonn Investments, that inked a fresh deal with Acorn. Cytonn was on October 8 appointed the lead transaction advisors for a Sh40 billion property deal that was to be previously funded by Britam.

Britam moved to court on October 28 seeking to recover Sh3.9 billion from the four former executives– who quit the investment firm two months ago – whom it accused of fraudulently transferring the money to bank accounts held by Acorn Group. Suit papers say the four former Britam employees – Edwin Dande (chief executive), Elizabeth Nkukuu (portfolio manager), Shiv Arora (investment analyst) and Patricia Wanjama (head of legal) – allegedly defrauded the company of the money earlier this year.

READ: Acorn reads judge’s bias in Sh3.9bn suit with Britam

Britam accuses the employees of using their positions to siphon the money from the company and forming rival companies dealing in similar services.

Arrested

Loss of the multi-billion shilling real estate project has opened what promises to be a bruising battle pitting Britam against its former employees for control of the lucrative projects that were to be developed by Acorn – where Britam is a minority investor.

The dispute on Friday sucked in the police who arrested Ms Nkukuu, Mr Arora and Mr Wanjama at the Cytonn offices at 3pm, drawing protests from Acorn lawyers. They were released on Saturday at 4 am.

“This is pure misuse of police powers. We will be in court on Monday (today) over the threat of arrest,” said John Ohaga of Triple OK Law Advocates.

“Six plainclothes policemen were at my client’s offices and they didn’t find him. He (Mr Kirathe) has not been arrested but there was an attempt to arrest him, which was unsuccessful. Obviously these are attempts to intimidate him.”

Mr Kirathe says the Britam suit is intended to cripple Acorn and force it to sell. “The lawsuits are not the result of fraud, but rather malicious and Machiavellian greed by the principals at Britam to acquire Acorn and the deal pipeline by brute force,” he added.

The High Court barred Acorn and Cytonn from transferring the disputed funds and developing any of the planned 10 real estate projects until November 12 when the case will be heard. The disputed funds are held at Chase Bank in accounts linked to special purpose vehicles (SPVs) that Acorn says were set up in partnership with Britam.

The SPVs are Edenvale Developments LLP, Starling Park Properties LLP, Crimson Court Development LLP, Sinopia Properties LLP and Mikado Properties LLP. Acorn reckons that Britam had injected Sh5 billion of mobilised funds to the projects and that the Sh3.9 billion was transferred to the SPVs with the knowledge of the Britam executives and top owners.

“It is, therefore, inconceivable that British-American Asset Managers and Baam Advisory LLP could have paid out more than Sh3 billion towards the financing of the various SPVs without the knowledge and approval of the highest echelons of British American Investments Company (K) Ltd, including the MD Mr Wairegi,” Mr Kirathe said.

Under the shareholder pact, Britam was to provide financing and land for ten real estate projects worth Sh40 billion while Acorn was to focus on the actual development and management of the properties, which include shopping malls, office complexes and mixed-use projects. The agreement also barred shareholders of Acorn, including Britam, from investing independently in property development to avoid a head- to -head competition with the real estate developer.

On September 18, Mr Wairegi informed Acorn that Britam wanted the shareholder pact revised to allow it pursue real estate investments independently, according to a court filing obtained by the Business Daily on Friday.

The filing was based on minutes from Acorn’s board meeting that took place on September 18 and attended by Britam top owners including billionaire investor Jimnah Mbaru.

The announcement marked a departure from an earlier plan that Britam shared with the media last November where Mr Wairegi said the Nairobi bourse listed firm would channel its real estate investments through Acorn.