Real Insurance owners gain from Britam share rally

Owners of Real Insurance, including former KenGen CEO Eddy Njoroge, have gained Sh414 million in two months from the shares they were offered in Britam in exchange for their firm.

Britam Wednesday received shareholders’ nod to acquire the insurer in a deal that will involve cash payment of Sh825 million and issuance of new shares worth Sh550 million to Real Insurance shareholders.

The deal struck on December 9 saw an estimated 49,435,777 new shares priced at Sh11.13 apiece created for Real Insurance owners.

Britam on Wednesday closed trading at Sh19.50, valuing the new shares at Sh964 million, reflecting a return of 75 per cent or Sh414 million.

The list of Real Insurance directors with stake in the company includes Mr Njoroge, the chairman Sam Kamau who is estimated to own about 20 per cent of the company, Joe Muchekehu and Ian Mukuria.

“They (Real Insurance owners) have already made a windfall as the offer share price is much lower than the market price,” Benson Wairegi, group managing director of Britam told the Business Daily on Wednesday on the side-lines of the firm’s extraordinary general meeting (EGM).

The Kenya Farmers Association (KFA) is also minority shareholder in Real Insurance, with a one per cent stake.

Real Insurance owners, through their investment vehicle dubbed Royal Ngao Holdings, will now own about 2.4 per cent of Britam.

READ: Former KenGen CEO among Real investors to earn Sh1.4bn

This makes Royal Ngao Holdings the 10th largest shareholder at Britam, whose top owners include business man Peter Munga, investment banker Jimnah Mbaru and James Mwangi, Equity Bank CEO. Mr Wairegi has 5.16 per cent stake worth nearly Sh2 billion.

Real Insurance owners look set to pocket at least Sh50 million if Britam retains its dividend payout rate of Sh1.15 per share paid in the last two years.

Its half year profits after tax grew by 28.5 per cent driven by a rally at the equities market, pointing to the possibility of a higher payout.

Real Insurance reported a profit after tax of Sh106 million in 2012 and paid out a dividend of Sh5.33 per share.

Britam’s share has gained 80 per cent over the past three months to trade at Sh19.90, which is more than double its listing price of Sh9. It listed at the Nairobi bourse in July 2011.

The capital gains are linked to the insurer’s increased deal-making, including November purchase of a 25 per cent in Acorn Group, a real-estate developer.

READ: Britam to buy Real Insurance in a share deal

Britam says the Real acquisition is informed by its quest to get a larger share of Kenya’s general insurance and a presence in more African countries.

It has presence in South Sudan, Rwanda and Uganda, but it derives more than 90 per cent of its earnings from Kenya. The firm plans to change this structure in the coming years as the subsidiaries mature.

The Real Insurance deal will give it a presence in Tanzania, Malawi and Mozambique.

Real’s general insurance business covers fire, commercial and motor vehicle risks and had premiums worth Sh2.2 billion in 2012.