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Capital Markets

Kenyan investors mint billions from Old Mutual buyouts

Mr Joseph Wanjui (left) and Mr Chris Kirubi have earned billions of shillings from Old Mutual buyouts. PHOTOS| FILE
Mr Joseph Wanjui (left) and Mr Chris Kirubi have earned billions of shillings from Old Mutual buyouts. PHOTOS| FILE 

UK financial services group Old Mutual’s aggressive purchase of Kenyan companies has earned local investors billions of shillings while unlocking value for the remaining shareholders whose portfolios have more than doubled in seven months.

Topping the list of investors who have gained billions from the sale of their companies to the UK firm is Joseph Wanjui, the chairman and the biggest individual owner at UAP, whose stake is now worth Sh7.7 billion based on the Sh180 per share price at which Old Mutual bought out his co-investors.

Businessman Chris Kirubi pocketed Sh3.6 billion, before tax, after selling his 9.58 per cent equity in UAP to the multinational while the founders of Faulu Bank, a microfinance institution, earned Sh3.6 billion from Old Mutual’s acquisition of a 67 per cent stake in the firm last year.

The recent windfalls add to Mr Josphert Konzolo’s receipt of millions of shillings in 2010 when Old Mutual acquired a 70 per cent stake in stockbroker Reliable Securities where he was the principal shareholder.

Old Mutual’s acquisition binge, including the UAP takeover, takes the entrepreneurial career of Mr Wanjui, who navigated childhood poverty and colonialism, to a higher rung.

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The businessman, who is a close ally of former president Mwai Kibaki, believes luck, hard work and gumption are the most critical success factors in life.

“Quite a bit of it was through luck, but a lot more came through very hard work,” Mr Wanjui writes in his autobiography My Native Roots: A Family History.

“Even where luck and circumstance play a role, as they do in any situation, every chance they provide must be pursued and grabbed with both hands. I took advantage of the many breaks that came my way.”

One such opportunity came in 2000 when French multinational AXA was selling its interest in UAP and Mr Wanjui teamed up with other local investors to fully acquire the insurance company.

Kenyan investors previously owned 40 per cent of UAP — a company that had changed hands several times following mergers and restructurings by its parent firms.

The deal left Mr Wanjui as the single-largest shareholder with a 35.84 per cent stake that has since dropped to 20.4 per cent with the entry of new investors in subsequent years.

The smaller stake is, however, worth much more in tandem with the company’s recent expansion in the local and regional markets where it is offering general and life insurance.

Prior to his purchase of UAP shares, Mr Wanjui had served in top executive positions at firms like East Africa Industries and Industrial and Commercial Development Corporation (ICDC), which was set up to support Kenyan entrepreneurs in the commercial sector that was at independence dominated by Whites and Asians.

Based on UAP’s over-the-counter (OTC) price of Sh86 in June last year, Mr Wanjui’s portfolio was at the time worth Sh3.7 billion. That has, however, surged to Sh7.7 billion, amounting to a Sh4 billion gain in just seven months.

This is one of the largest non-speculative portfolio gains in less than a year, reflecting investors’ estimates of UAP’s current and future earning power.

Plans by the financial services company to list on the Nairobi Securities Exchange (NSE) could catapult Mr Wanjui straight into the exclusive club of stock market billionaires.

He would join the likes of Mr Kirubi, Pradeep Paunrana, James Mwangi, John Kibunga Kimani, Bharat Thakrar, Baloobhai Patel, Benson Wairegi and Amin Nanji Juma who hold billions of shillings in one or multiple stocks at the bourse.

The buyouts have pushed up UAP’s share price to the current Sh180, more than double the company’s trading price of Sh86 in the OTC market in June last year. It also marks a 28.5 per cent premium on the company’s present market price of Sh140 per share.

Rising valuation also lifted UAP’s former CEO James Muguiyi to the billionaires’ league where Mr Kirubi and Mr Wanjui have increased their fortunes.

Mr Muguiyi, whose holdings barely hit the Sh1 billion mark last year, is now firmly in the billionaires’ club with Sh2.2 billion worth of UAP shares.

A long-serving executive of UAP since the 1980s, Mr Muguiyi is currently a director of the company and investment firm Centum where he is the chairman.

Mr William Kimutai, who is listed as having a 1.65 per cent stake in UAP, made it to the list of top beneficiaries whose stake more than doubled to Sh629.1 million.

The planned listing of UAP through introduction later this year could trigger a further increase in  investor wealth.

“UAP will retain its diverse and loyal Kenyan shareholder base of nearly 1,000 persons, and will be able to continue on its path to its intended listing on the NSE,” Old Mutual said in a statement.

UAP will have only 27.2 million free floating shares, representing 12.9 per cent of the entire issued stock at a time when more investors are keen on buying into the company.

The 27.2 million shares are currently held by Mr Kimutai, Andrew Smith and nearly 1,000 other retail investors.

Mr Wanjui and Mr Muguiyi have committed to retain their combined shareholding of 26.43 per cent, joining Old Mutual in holding their portfolio in the company for the long term.

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