Companies

Baloobhai Patel could earn Sh38m in BOC buyout

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Billionaire investor Baloobhai Patel. FILE PHOTO | NMG

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Summary

  • Carbacid would have offered to buy all the shares of BOC but it cannot do so because of existing cross ownerships in the companies.
  • BOC already owns a 5.83 per cent stake in Carbacid and the law bars subsidiaries from owning shares in their parent companies.

Carbacid Investment’s #ticker:CARB major shareholder Baloobhai Patel could be paid up to Sh37.9 million for helping the company to acquire its rival industrial gases manufacturer BOC Kenya #ticker:BOC.

Carbacid would have offered to buy all the shares of BOC but it cannot do so because of existing cross ownerships in the companies.

BOC already owns a 5.83 per cent stake in Carbacid and the law bars subsidiaries from owning shares in their parent companies.

Carbacid is therefore limited to acquiring a minority stake of 49 per cent in BOC, with Mr Patel offering to buy the 51 per cent which is the threshold for consolidating subsidiaries.

According to an agreement between the parties, Carbacid could buy the BOC shares from Mr Patel’s investment vehicle Aksaya Investments LLP at a later date at the same offer price of Sh63.5 apiece plus a fee of up to Sh37.9 million.

It is envisaged that BOC will have sold its minority stake in Carbacid by then, removing the legal hurdle.

“Aksaya has agreed with Carbacid that if the offer shares held by Aksaya are acquired by Carbacid within and up to six calendar months of the closing date, then the price for such offer shares shall be the takeover offer price and in addition Aksaya shall charge a fee equivalent to one per cent per month … of the value of the offer shares actually acquired by Aksaya for agreeing to be a co-offeror,” Carbacid said.

“If the sale is effected after such six-calendar month period, the price shall be a price as may be agreed between Carbacid and Aksaya.”

The proposed transactions will be off-market and will be subject to approval by the Capital Markets Authority (CMA).

Mr Patel has offered to buy 9.9 million BOC shares at a total cost of Sh632.3 million. Assuming he strikes a deal to sell the stock to Carbacid in the sixth month following the completion of the BOC buyout, he will charge a total fee of Sh37.9 million or Sh6.3 million per month.

If BOC sells its minority stake in Carbacid, then Mr Patel will step back and let Carbacid buy 100 per cent of BOC directly.