Court stops CMA from clearing Rea Vipingo takeover

The High Court has stopped the Capital Markets Authority from clearing the takeover of Rea Vipingo by any of the three bidders until a dispute over the offer prices is determined.

Vania Investment Pool (VIP) successfully applied before Justice Weldon Korir that the takeover timetable be suspended on the grounds that its revised bid price of Sh80 per share was rejected by the regulator for allegedly being filed outside the deadline.

CMA had targeted to complete the takeover by the end of June.

“An order of prohibition stopping the respondent (CMA) from taking any further step or implementing any timetable it has set for completing the takeover of Rea Vipingo Plantations Ltd based on the directions that offers made could not be varied after February 28, 2014,” ordered Justice Korir.

According to court papers, VIP accuses CMA of denying it a chance to vary its earlier offer of Sh55.

CMA had in a notice published on February 5 set February 28 as the closing date for submission of offers and counteroffers.

“The said notice communicating directions was purported to have been issued under Section 11(3) (w) of the CMA Act. The decision to set a deadline of February 28 is contrary to the mandatory provisions of the regulations,” said Dilesh Somchand Bid, a director at VIP in a sworn affidavit.

The county government of Kilifi, where Rea Vipingo owns 10,570 acres, has separately moved to court to stop the impending sale of the company, saying the firm fraudulently acquired public land.

The Vipingo estate in Kilifi was acquired in 1939 under the colonial land laws, and the county wants the National Land Commission to repossess the parcels and distribute it to locals.

The court battles could end up denying shareholders an opportunity to make windfalls from their holdings.

READ: Third company makes competing bid for Rea Vipingo

Rea Vipingo was suspended from trading on the Nairobi Securities Exchange in November after Rea Trading Company’s (Reat) notice of takeover at Sh40 per share. At the time the stock was trading at Sh27.50 per share.

Reat later revised this to Sh70 per share and a conditional premium of Sh15 per share if the sisal firm’s vast land was sold.

Reat’s initial bid had by then been trumped by Centum Investments Company, which in December offered Sh50 per share before Bid Investments came up with Sh55 per share.

Bid later transferred its offer to VIP before Centum raised its offer to Sh75 per share.

The sisal maker did not pay a dividend for the year ended September 2013 after paying a dividend of Sh1.10 per share in 2012. VIP’s Sh80 per share offer values Rea Vipingo at Sh4.8 billion while Reat, which is owned by Jeremy and Richard Robinow, valued the sisal producer at Sh5.1 billion.

Intense competition for Vipingo appears to be hinged on the 70,000 acres of land the company owns in Kenya andTanzania, which independent analysts estimate is worth Sh10 billion.

Rea Vipingo put the land under leasehold at Sh208.03 million as of September 2013 – at historical cost - but did not declare the market value of freehold land.

Rea Trading Co already owns 57.04 per cent of Rea Vipingo, Centum 0.49 per cent stake and Bid 1.15 per cent through an associate Kenyalogy.com.