British firm puts in Sh3bn takeover bid for AccessKenya

A UK company on Monday made known its intention to buy AccessKenya for Sh3.05 billion, a move that could see the local information technology firm delist from the Nairobi Securities Exchange (NSE).

Dimension Data Plc, an IT firm incorporated in the UK, has offered to acquire a 100 per cent stake in AccessKenya at the price of Sh14 a share — offering the shareholders a 42 per cent premium over the Sh9.85 price at the close of business last Friday.

“We have today been served with a notice of intention [for a] takeover from Dimension Data Group Plc, a limited liability company incorporated in the UK…notifying us of its intention to acquire all the issued shares in AccessKenya Group,” said AccessKenya chairman Daniel Ndonye in a filing to the NSE.

Mr Ndonye has asked the NSE to immediately suspend the trading of AccessKenya’s shares until such time as “the offer is either successful, withdrawn or rejected by the requisite number of shareholders.”

At Sh14 a share, the price of Sh3.05 billion is Sh1 billion higher than AccessKenya’s market capitalisation of Sh2.05 billion at the close of business last Friday. The Sh14 price is, however, substantially lower than the stock’s peak price of Sh40 in 2008.

AccessKenya crossed the IPO price last week following intensive buying of the stock that now appears to have been driven by investor anticipation of the sale.

If the deal comes through, AccessKenya will have to seek the regulator’s approval to exit the securities exchange and convene a shareholders’ meeting to get the stamp of approval. The planned sale needs the approval of owners with 90 per cent of the market cap to go through.

That leaves the remaining 10 per cent of the shareholders with the option of selling their stake to the new owners or staying put to continue earning a dividend from the delisted private company.

Should Dimension Data fail to convince at least 90 per cent shareholders to force a takeover of the entire firm, it could be allowed to buy up to 75 per cent of AccessKenya and continue to run it as a listed company. Kenyan capital markets regulations cap foreign shareholding at 75 per cent.

AccessKenya would also need to have at least 25 per cent free float for it to remain listed on the NSE. AccessKenya is proposing to pay a 30 cent dividend per share in the first shareholder payout in three years. The recent rally in its price was partly attributed to the looming dividend payout.

If the deal is successful, the company will follow in the footsteps of other firms that have delisted from the exchange including Unilever Kenya, East African Packaging and African Lakes.

AccessKenya recently made it known that it was open to a takeover bid as long as the price is right, reversing an earlier stance by the Somens that they would not sell the family jewel.

(Read: Somen family does not rule out AccessKenya sale)

“If someone comes along with a serious and sensible offer, we have a responsibility to all shareholders to consider it,” said Jonathan Somen, the chief executive in an interview with the Business Daily two months ago.

AccessKenya’s share price has more than doubled this year after nearly three years of stagnation.

“With regard to the price, we have also consistently stated that we feel that our share price is not reflective of the performance of the business,” Mr Somen added.

It was not immediately possible to tell the impact of the proposed buyout on AccessKenya’s 340 employees as they were not mentioned in the statement.

Dimension Data, which employs 14,000 people around the world, is however expected to look keenly into the company’s operational fitness and cost structure as it seeks to put it on a solid footing.

Staff retention has been a major flash point in the recent attempts by foreign firms to acquire Kenyan companies. Last year, Puma Energy was forced to drop out of a takeover bid for oil marketer KenolKobil after the employees put up a big fight over their fate.

Dimension Data has used acquisition as its key method of growth, acquiring significant shareholding in no less than 10 companies in the past 15 years.

The company already operates in Kenya through subsidiaries Dimension Data Kenya, Internet Solutions Kenya, and Plessey Kenya. If the takeover bid succeeds, the IT firm intends to merge its Internet Solutions Kenya business with AccessKenya.

Internet Solutions, which employs 1500 people, offers network service in sub-Saharan Africa and has a presence in South Africa, Kenya, Mozambique, Nigeria and Ghana.

“The acquisition of AccessKenya is in line with Dimension Data’s goal to pursue a strategy of expansion in sub-Saharan Africa. The growth opportunities and liberal and progressive ICT regulatory framework within Kenya make this market highly attractive for Dimension Data to establish an even stronger presence,” said Derek Wilcocks, Dimension Data’s Middle East and Africa CEO.

Analysts have for several years said that AccessKenya is a potential target of acquisition arguing that it has been grossly undervalued given the ICT market’s potential. It has a built a diverse range of customers despite having a lean staff.

“AccessKenya, which was also the first ICT firm to list on the NSE, employs 340 staff, and provides predominantly connectivity-based data services to about 5,000 corporate customers in Kenya.

These customers range from large multinationals, government agencies, and NGOs,” Dimension Data said in a statement.

AccessKenya’s fibre network, which runs for hundreds of kilometeres, is seen as a key competitive strength that has increase the firm’s attractiveness to potential buyers.

AccessKenya owns and operates a 400 kilometre Carrier Ethernet Fibre Optic Network in Nairobi and Mombasa – and connects over 500 commercial buildings.

The company also operates two wireless networks, further extending its coverage to 10 other towns in Kenya.

The other strength the company has had, even as it ran without offering shareholders a dividend for three years was its customer base, seeing mainly as occupying the higher end of the market.

“In addition to offering a wholesale carrier services, AccessKenya also has a high-end consumer base,” said the company.

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