A UK firm’s bid to acquire AccessKenya fully and delist it from Nairobi Securities Exchange got a boost after the government agreed to exempt the technology firm from the 20 per cent local ownership rule.
Information Communication Technology Cabinet Secretary Fred Matiang’i told the Business Daily that ministry had agreed to the waiver and was working on terms of the exemption.
The law requires telecom firms to have at least 20 per cent local ownership, but Dimension Data wants to acquire a 100 per cent stake that will allow for the delisting of the firm from the Nairobi bourse.
The rule prompted Dimension Data, which is buying AccessKenya at Sh14 a share or Sh3.05 billion, to ask for an exemption.
“It will be done (the exemption) this is a public issue and I don’t see why it should not be done,” Dr Matiang’i told the Business Daily last week. “We are aware of the urgency of the matter. However, there are procedures to be followed before we can grant such an exemption.”
The waiver will make AccessKenya the second major firm to be exempted from the 20 per cent local ownership rule after India’s Bharti Airtel, which owns 95 per cent of Airtel Kenya.
It will also remove the headache of the AccessKenya CEO Jonathan Somen seeking cash to re-purchase 20 per cent of the firm’s shares to comply with the local shareholder rules.
The UK firm had said that Mr Somen would buy back the stake if it failed to obtain the waiver.
Presently, Mr Somen owns a 16.97 per cent stake and could require about Sh98.5 million to push his ownership to 20 per cent. But the Somen family, including Jonathan’s father Michael and bother David, will pocket nearly Sh1 billion from the sale of their combined stake that stands at 30.26 per cent.
To attract new investments into the sector, the regulation capping foreign ownership of telcos at 80 per cent was in 2009 relaxed to allow foreigners to launch operations without a Kenyan partner and gradually comply within three years.
The rule also applies to companies that are facing difficulties raising capital from local shareholders who may seek exemption to allow Kenyan investors to dilute their stake below 20 per cent for new buyers to inject capital.
This change in regulation is what allowed former Information minister Samuel Poghisio to let businessman Naushad Merali sell a significant portion of his shareholding in Airtel (then Zain) without contravening the law.
Mr Merali, the only local shareholder in Airtel, has five per cent stake in the operator. He sold shares equivalent to 15 per cent to Kuwait-based Zain Group, which in June 2010 sold its African interests to Bharti Airtel.
In AccessKenya, the new owners have not made public the reasons behind their exemption.
At Sh14 a share, the price of Sh3.05 billion is Sh1 billion higher than AccessKenya’s market capitalisation of Sh2.08 billion on May 7 when it was suspended from trading to allow the conclusion of the deal
The Sh14 price is, however, substantially lower than the stock’s peak price of Sh35 in 2008.
If the deal comes through, AccessKenya will have to seek the regulator’s approval to exit the securities exchange and convene a shareholders’ meeting to get the stamp of approval. The planned sale needs the approval of owners with 90 per cent of the market cap to go through.