A high-stakes boardroom drama is once again playing out in the financial services industry following last month’s multi-billion-shilling acquisition of UAP Holdings by Old Mutual and the subsequent appointment of Old Mutual boss Peter Mwangi as the chief executive of the merged group, edging out UAP’s Dominic Kiarie.
It was the second time Mr Kiarie missed a chance to head Old Mutual, the first being in March 2008, when the investment firm announced it had appointed him the new chief executive to replace Stewart Henderson who had resigned five months earlier.
Mr Kiarie had quit his position as the managing director of British-American Asset Managers (BAAM) to take up the new role at Old Mutual from April 1, 2008.
But he spent only a few days on the job before going back to his position at BAAM, a unit of financial services firm Britam for what Old Mutual later said were “personal reasons.”
Mr Kiarie stayed at BAAM until July 2011 when he left for UAP Holdings where he had landed a job as deputy CEO. He subsequently rose to become the insurance company’s chief executive, replacing James Muguiyi who retired in December 2012.
In a twist of fate, Old Mutual recently took over UAP Holdings — a move that culminated into the merger of the two companies and the appointment of Mr Mwangi, Old Mutual chief executive, as the head of the new group. Mr Kiarie has since tendered his resignation.
Old Mutual on Thursday said Mr Kiare’s position fell through during an ongoing restructuring that has merged previous stand-alone businesses in Kenya with UAP.
“Of the two [Mr Kiarie and UAP-Old Mutual new CEO Peter Mwangi], we felt Mr Mwangi has better knowledge of the two companies,” Mr Ralph Mupita, the chief executive of Old Mutual Emerging Markets, told the Business Daily.
Mr Mwangi has previously served on the board of UAP in his capacity as the chief executive of Centum, an investment firm that had a significant stake in the insurer.
He has also had time to familiarise himself with Old Mutual’s business, having joined the firm in October last year after retiring as the chief executive of the Nairobi Securities Exchange (NSE).
Mr Kiarie, 44, could not be reached for comment by the time of going to press.
Recent communication from the company announcing the merger and appointment of directors and executives made no mention of Mr Kiarie, signalling that his departure may have been similar to the 2008 snub of Old Mutual.
Old Mutual executives said the merged entity will have Mr Mwangi at the helm, with general managers, including banking, asset management and insurance, to be appointed for the respective business lines.
Mr Kiarie’s extensive experience in the financial services industry should land him another high-profile job in the vibrant insurance sector which has seen a wave of acquisitions, mergers and greenfield investments in the past one year.
Mr Kiarie holds a Master’s of Philosophy Degree in Finance from the University of Cambridge, United Kingdom, and a Bachelor of Science Degree in Actuarial Science from The Sir John Cass Business School, City University in London.
Mr Henderson, whom he was to replace at Old Mutual, later took up top positions at Nedbank Eastern Africa and Indigotelecom based in Nairobi and is now New Zealand’s Honorary Consul to Kenya.
Mr Kiarie had built up a substantial equity position in UAP and could remain as a significant minority investor in the amalgamated business. He held 112,500 shares in UAP, equivalent to a 0.05 per cent stake as of December 2014.
UAP’s manic share price rally in the wake of the Old Mutual buyout means the stake is now worth Sh22.5 million based on the current over-the-counter (OTC) price of Sh200 per share.
The firm’s share price traded at Sh86 in June last year and has more than doubled in one year.
Mr Mupita said investors, who have been buying UAP’s shares at the OTC, would be offered stocks in the merged business at a ratio yet to be determined.
Old Mutual is also looking at the possibility of buying them out in cash at a price to be set later. Such a buyout will further enhance the multinational’s stake in UAP-Old Mutual.
The investment firm already has a 60.7 per cent equity in UAP after buying out businessman Chris Kirubi, Centum Investment Company and a consortium of private equity firms for Sh23 billion.
Businessman Joe Wanjui, who has been appointed chairman of UAP-Old Mutual, has a 20.46 per cent stake in UAP, which will be flipped to shares in the combined business.
Mr James Muguiyi, with a 5.97 per cent equity in UAP, is also expected to be allotted shares in the new entity.
The two billionaire investors had committed to retain their stakes, forming a base of local shareholders in the company that is expected to go public in the medium term.
Mr Mupita said UAP-Old Mutual will list on the NSE in the next 18 to 30 months, conditional on a favourable market.
The listing will provide price discovery and liquidity to the retail investors who still be holding their stock.
The OTC market is relatively illiquid and less transparent compared to the main bourse.
Mr Mupita said the fair value of UAP-Old Mutual is yet to be determined and will await the merger and integration to be complete. UAP alone is valued at Sh42.2 billion going by the OTC share price, with the combined business potentially topping the Sh80 billion mark.
In the near term, Mr Mwangi will focus on merging the two firms to realise synergies and economies of scale in an increasingly competitive market.