Members of the public queue to buy Kenya Re shares at Suntra stockbrokers. The brokerage firm is negotiating to sell over half its shareholding. Fredrick Onyango
Suntra Investment Bank has entered into negotiations that could see a UK-linked private equity firm acquire more than half of its shareholding.
Fusion Capital has already bought a 10 per cent stake in Suntra and is said to be eyeing a larger stake in the brokerage firm.
The private equity firm bought the stake for an estimated Sh25 million in March – helping the firm to meet the new capital requirements of Sh250 million for investment banks.
Suntra’s newly appointed CEO, Mr Crispus Githiaka, told the Business Daily that new shares will be created for Fusion Capital once the deal is complete.
“We expect to complete the negotiations and have Fusion Capital take up the shares soon,” said Mr Githiaka.
Suntra’s stock is currently trading at about Sh100 each over the counter (OTC), putting the company’s market value at an estimated Sh1.25 billion given its 12.5 million issued shares.
Fusion is gunning to acquire 55 per cent shareholding in the investment bank, which would be worth Sh688 million in market value terms.
A statement released last week by Suntra chairman Nguru Wachira described Mr Githiaka as a “seasoned strategist” who had previously held senior management positions.
“Mr Githiaka was recently finance director of the Nairobi Hospital and has worked in senior positions with Nation Media Group, International Computers and the Nairobi City Council.
The board appointed Mr Githiaka CEO last Monday after the sudden departure of Mr Michael Gichohi as chief executive. Mr Gichohi declined to comment on his departure, which came as the negotiations for the sale of new shares to the PE firm picked pace.
Mr Gichohi is said to have since joined Uwezo Deposit-Taking Microfinance (Uwezo DTM) institution in an unspecified position. Mr Gichohi is an economist, who has worked as a banker with Commercial Bank of Africa (CBA) and government planner. He also worked with Deloitte East (then Deloitte and Touche) as a consultant.
The PE firm, Fusion Capital, a financial advisory firm in Nairobi which is part of Britain’s Fusion Investments, has been on an expansion drive in east Africa.
The firm has recently announced the creation of a $150 million (Sh15 billion) fund for investment in small and medium enterprises in east Africa. The Fusion African Access fund intends to invest between $250,000 and $5 million in SMEs in various sectors.
Daniel Kamau, the equities and investment manager at Fusion Capital, declined to comment on the negotiations.
Among the deals that Suntra is currently doing is a private placement for a private airstrip called Gaitu Airport in Meru worth about Sh50 million.
In the past Suntra has played key roles in various market deals including advising InvesteQ Capital on a rights issue that was completed in April 2010. It was a co-lead sponsoring broker and placing agent for Shelter Afrique’s medium term note of Sh1 billion – a deal that was completed in June 2009.
It was also lead sponsoring stockbroker and placing agent for the Barclays Bank Bond offer of 2007 and 2008 worth a total of Sh3 billion.
Suntra is among the stockbrokerage firms that have sold stakes in recent years as a way to meet increased capital requirements as well as need to improve on competitiveness in the market.
Takeovers abound
In 2010, the company’s brokerage commissions were Sh75.3 million, which was more than double the previous year’s. Expenses reduced while profits after tax went down by 142 per cent to Sh26.7 million.
Suntra’s assets were Sh621 million showing an increase of 13 per cent. Its cost-to-income ratio was 67 per cent – which was among the lowest in the industry. Actual expenses went down by 46 per cent to Sh53.2 million.
In 2009, the company’s income stood at Sh79.4 million while its expenses were Sh99.4 million.
It made a loss of Sh63.3 million in a year when nearly half of the brokerage houses operating in Kenya made a loss. Its cost-to-income ratio was then 125 per cent – making it a major contributor to the loss-making position the company found itself in.
Private equity firms normally seek return of between 15 and 30 per cent on investment over a minimum of four years.
Reliable Securities was taken over by Old Mutual Group last year. In 2010, the company’s income was down 64 per cent to Sh18.5 million in a year it incurred Sh13.5 million loss.
Solid Securities was bought by NIC Securities in 2009.
