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

Former power generating company KenGen chief executive Eddy Njoroge is among top shareholders of Real Insurance who are set to earn Sh1.4 billion in the ongoing buyout of the company by Britam.

The transaction will involve a cash payment of Sh825 million and issuance of new shares to Real Insurance shareholders, British American (Britam) announced in a statement on Monday.

The list of Real Insurance directors who also own shares 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.

The number of shares to be issued will depend on Britam’s average trading price at the bourse in the 75 days before March 31, which is marked as the transaction completion date.

“The share consideration implies that all the shareholders on record as at the completion date will be diluted by between 2.42 per cent up to 2.67 per cent,” said Britam in Monday’s statement.

The company will be seeking shareholders’ approval of the deal in an extraordinary general meeting scheduled for February 19.

Approval of the deal will see some shareholders of Real Insurance break into the top 10 owners of Britam. The shareholders are 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.

READ: Britam to buy Real Insurance in a share deal

Britam’s profits after tax grew by 28.5 per cent as at the half-year 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.

The transaction values Real Insurance at Sh1.4 billion given that Britam is acquiring 99 per cent shareholding. This is higher than the valuation the firm had been given by analysts at Standard Investment Bank who had placed it at between Sh1 billion and Sh838 million.

“The agreed price represents a multiple of 10.54 times of REAL’s average after tax profits for the two immediate preceding years (2012/11) after deducting non-controlling,” said Britam.

Standard Investment holds that Britam will comfortably settle the cash amount without seeking debt or altering its investment portfolio given that it was sitting on a cash pile of Sh3.4 billion in June.

“Britam considered the strong positioning of REAL in non-life insurance, long operational history and customers that comprise leading corporates in Kenya,” said Standard Investment Bank in a note to its investors on the transaction.

The deal will deepen Britam’s regional presence to seven countries from the current four.