Companies

CMC owners set to pocket billions from buyout deal with Dubai firm

cmc

CMC Chairman Joel Kibe (left) and top shareholder Peter Muthoka. Al-Futtaim Group intends to purchase all the shares of CMC through a cash offer at Ksh13. FILE

Motor dealer CMC is set to delist from the Nairobi Securities Exchange (NSE) after the top shareholders agreed to sell their stake to Dubai-based conglomerate Al-Futtaim.

CMC said Monday that Al-Futtaim had made a Sh7.5 billion offer for the business, translating to Sh13 per share for the motor dealer’s 582.7 million ordinary shares.

The offer should come as a big relief to shareholders as it represents a near zero erosion of the value of their investment after about two years of turbulence caused by boardroom wars.

“I think Sh13 in the hand is a compelling offer that is priced to clear,” said Aly- Khan Satchu, an independent analyst.

CMC Holdings, which owns dealerships in Kenya, Tanzania and Uganda and has exclusive distribution rights for Ford, has not traded publicly since September 2011 when the Capital Markets Authority (CMA) suspended the stock due to a boardroom row.

The motor dealer stopped trading at a price of Sh13.50 and has since weathered a rough period of shareholder wars that forced out 80 per cent of board members and caused the loss of premium Jaguar and Range Rover brands.

Al-Futtaim’s offer makes it the biggest inflow of foreign investment into Kenya this year and a signal of the increasing attractiveness of East Africa’s largest economy to foreign companies looking to enter Africa.

The looming buyout of CMC comes as listed technology firm AccessKenya moves to conclude its acquisition by South Africa’s Dimension Data Plc in a Sh3 billion deal.

It adds CMC to the growing list of Kenyan companies where foreign investors have acquired majority stakes in the past one year — including Fina Bank, Mercantile Insurance, Interconsumer Products, Kenya Data Networks (KDN) and Swift Global.

All CMC’s top shareholders — controlling about 65 per cent of the company — have committed to sell their stakes to Al-Futtaim in the deal that will see them pocket billions of shillings while exiting the business. A source familiar with the deal said all the top shareholders had signed irrevocable sale agreement with Al-Futtaim, putting the sale on a firm path.

If the deal goes through, CMC’s top shareholder Peter Muthoka, who has been at the centre of the legal battles, is expected to walk away with Sh1.8 billion for his 24.7 per cent stake in Kenya’s fifth-largest auto dealer, making him the biggest beneficiary of the buyout.

Mr Muthoka gradually accumulated CMC shares from early 2000s through his logistics firm Andy Forwarders, which serves a number of blue chip clients such as Tata Africa and General Motors East Africa.

Business associates Paul Ndung’u and Joel Kibe, who also serves as CMC chairman, will get Sh1.7 billion for their combined 23 per cent stake while former long-serving CMC chairman Jeremiah Kiereini will exit with Sh910.4 million for his 12.5 per cent stake.

Mr Kiereini is a long-term investor in CMC, who first bought into the company in the 1970s and served as its second chairman after replacing the firm’s founder investor J.M. Benzima in 1996.

The list of major beneficiaries of the sale includes businessman Ashok Shah who will exit with a cheque of Sh39.6 million for his 2.61 per cent stake and former Attorney-General Charles Njonjo who will earn Sh10.1 million for his 1.32 per cent stake.

Al-Futtaim said it was buying CMC to get an entry into the regional consumer market and analysts expect the Dubai-based firm to expand its interests beyond the automotive sector.

“The acquisition will help the Nairobi-based automotive group to introduce more brands beyond its current stable of Volkswagen, Ford, Mazda, Suzuki, Case New Holland, MAN, UD, Maruti and Case Construction,” Marwan Shehadeh, an executive at Al-Futtaim said in a statement.

“We are continuing our expansion drive across Africa and we hope that CMC will be the jewel in the crown of our inroads into the continent.”

The Dubai-based firm is expected to transform the board, management, and operations of CMC as it realigns the company with its growth strategy. Mr Kibe told Business Daily that Al-Futtaim had asked him to remain as chairman for the foreseeable future.

“I have been requested to stay on as chairman as the company seeks to grow further in the coming years,” he said.

CMC posted a net profit of Sh105.3 million in the year ended September 2012 compared to a loss of Sh181.1 million the previous year after sales stagnated at Sh11.7 billion. The company did not declare any dividend.

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