Total owners firm grip on company with Sh5bn buy-in

Total Kenya’s French parent company has raised its stake in the oil marketer following last year’s Sh5.2 billion capital injection. Photo/FILE
Total Kenya’s French parent company has raised its stake in the oil marketer following last year’s Sh5.2 billion capital injection. Photo/FILE  Nation Media Group

Total Kenya’s French parent company has firmed its grip on the oil marketer where it has significantly diluted minority shareholders’ stake.

Regulatory filings show that Total Outre-Mer now controls a 93.96 per cent stake in the company, up from 87.27 per cent in May last year.

This came as the combined ownership of Total’s smaller investors dropped to 6.04 per cent from 12.73 per cent in the period.

Total’s parent firm raised its stake after injecting Sh5.2 billion capital into the company in June last year. The oil marketer is using the money to retire its short-term borrowings whose interest charges have eaten into earnings over the past few years.

Total Outre-Mer will now be taking the bulk of the oil marketer’s dividends after further diminishing shareholding by smaller investors like Jubilee Insurance and Phoenix of East Africa Assurance Company.

“The balance sheet was strengthened with the increase of the company’s paid up capital by Sh5.2 billion, resulting from the issuance of additional preference shares,” Total said in a statement.

The French multinational paid Sh15.71 for each of the 330.9 million preference shares it was allotted in the company whose stock currently trades at a low of Sh13.8.

The firm already owned 126.3 million ordinary shares and 123.4 million preference shares in the oil marketer before the latest stock deal.

The new preference shares, which have pushed Total’s shareholder equity to Sh14.1 billion from Sh9.1 billion, will be redeemable.

This means that they will earn dividend at the same rate as ordinary shares but the company has a right to buy them back at a future date.

Voting rights at Total remain unchanged as the French multinational will only rely on its ordinary shares equivalent to a 42.3 per cent stake to appoint directors, among other strategic decisions.

The French firm, however, remains the single largest investor in the oil marketer, with each of the remaining shareholders owning less than one per cent stake.

The company opted to issue the additional preference shares to Total Outre-Mer to raise cash for retiring its loans that have partly contributed to its loss-making.

It made a net loss of Sh243.6 million in the nine months to September compared to a net profit of Sh69.4 million the year before.

This came as net finance costs rose to Sh1.4 billion from Sh904 million informed by interest on its short-term debts like bank overdrafts and loans.

The higher costs pushed the firm into the loss-making territory despite its net sales rising 18.3 per cent to Sh77.4 billion. It cut its short-term borrowings to Sh7 billion from Sh11.7 billion in a move that is set to lessen its debt burden at a time when it is wresting market leadership from top rival KenolKobil.

Data from the Petroleum Institute of East Africa put Total’s local market share at 21.5 per cent in nine months to September, slightly ahead of Kenol’s 21.4 per cent.

Kenol lost market leadership after ending its fuel price discount, which saw its share of local sales drop from 25 per cent in the year ended December 2011, with Total’s also dropping from 23.3 per cent in the same period.

Total last paid a dividend for the year ended December 2010 when its shareholders received Sh1.05 per share and investor interest has waned.

“Investor interest in the stock will largely be determined by its liquidity since all investors are being treated equally in terms of dividends,” said Vimal Parmar, the head of research at Burbidge Capital.