Real Insurance sellers book Sh700m paper gain on Britam

The investors who sold Real Insurance to financial services group Britam have recorded an extra paper gain of Sh706 million on their sale price going by the NSE-listed company’s current market price.

The shareholders, including Mr Sam Kamau, agreed to sell a 99 per cent stake of Real Insurance to Britam for a total consideration of Sh1.3 billion.

They were to receive Sh825.3 million in cash and between 46.9 million and 51.9 million units of Britam stock depending on the issue price ranging between Sh11 and Sh13 per share.

Regulatory filings show that Britam in October allotted the Real owners 46.9 million shares at Sh11.71 per share to satisfy the stock component of the buyout that was first announced in November last year.

Real’s owners have however benefitted further from a rally in Britam’s stock that was sparked by news of the same acquisition.

The shares allotted to the Real owners’ investment vehicle Royal Ngao Holdings is now worth Sh1.2 billion going by Britam’s price of Sh26.75 per share, pushing the total current market value of the stake to Sh2 billion.

READ: Real Insurance owners gain from Britam share rally

This represents a 51.3 per cent gain on the original deal price, equivalent to a capital gain of Sh706 million. Britam’s stock has recorded one of the strongest performances at the Nairobi Securities Exchange in the past 12 months, gaining 76 per cent.

It had hit highs of Sh37.75 before receding to the current level which is nearly triple its initial public offering (IPO) price of Sh9 in July 2011.

The 46.9 million shares issued to Real owners has diluted Britam’s pre-existing investors 2.48 per cent, expanding the volume of the firm’s outstanding shares to 1.93 billion units.

The consortium of Real owners now rank among the top 10 Britam investors after billionaire investors Dawood Rawat, Jimnah Mbaru, Peter Munga, James Mwangi, and Benson Wairegi.

Britam bought Real as part of its strategy to grow its business in the local and regional insurance market, noting that its newly acquired subsidiary has been profitable for years. Real is a general insurer operating in Kenya, Tanzania, Malawi and Mozambique.

Before the deal, Britam had a direct presence in Kenya, South Sudan, Rwanda and Uganda but derived more than 90 per cent of its earnings from the local market.

Britam’s net profit rose 27 per cent in the half-year ended June to Sh2.7 billion, helped by higher premiums and gains in its investment portfolio.
The performance did not capture earnings from Real which was yet to be integrated.

Britam is however expected to complete the merger of the two firms’ books in the coming weeks, reflecting the subsidiary’s earnings in the parent results.