The decision comes after an independent adviser hired to review the transaction declared that Carbacid's offer to buy BOC Kenya at Sh63.5 per share undervalues the industrial and medical gases manufacturer by 30.8 per cent.
Dyer and Blair Investment Bank wrote to the board of BOC, stating that the company has a fair value of Sh91.76 or an aggregate of Sh1.7 billion.
This is Sh552 million more than Carbacid's total bid price of Sh1.2 billion.
BOC Kenya #ticker:BOC has opted not to recommend the company's takeover by Carbacid Investments #ticker:CARB to its shareholders, marking a rare instance where the board of a Nairobi Securities Exchange-listed firm has opted to sit on the fence while it is being acquired.
The decision comes after an independent adviser hired to review the transaction declared that Carbacid's offer to buy BOC Kenya at Sh63.5 per share undervalues the industrial and medical gases manufacturer by 30.8 per cent.
Dyer and Blair Investment Bank wrote to the board of BOC, stating that the company has a fair value of Sh91.76 or an aggregate of Sh1.7 billion.
This is Sh552 million more than Carbacid's total bid price of Sh1.2 billion.
BOC has responded to Dyer and Blair's opinion by telling its shareholders that it will not tell them whether or not to sell their shares to Carbacid.
"Having carefully considered the opinion of the independent adviser … the board unanimously agrees that the price of Sh63.5 does not reflect a fair value of the company,” BOC says in a circular to shareholders.
“Your board has therefore for the foregoing reasons resolved NOT to recommend the offer for acceptance by shareholders. Shareholders are therefore encouraged to obtain independent professional advice from their professional advisers regarding the merits of accepting or not accepting the offer.”
The investment bank’s assessment looks set to complicate the transaction in which BOC’s majority shareholder, BOC Holdings, has already committed to sell its 65.38 per cent stake to Carbacid at the Sh63.5 per share offer price.
Sources familiar with the matter told Business Daily that BOC’s decision not to recommend the buyout is aimed at avoiding potential lawsuits from disgruntled investors who have been emboldened by Dyer and Blair’s opinion. They include businessman Ngugi Kiuna, a former chairman of BOC and the second-largest investor in the company with 1.4 million shares equivalent to a 7.6 per cent stake.
Mr Kiuna says the takeover process is shrouded in secrecy, making it difficult to evaluate the fairness of Carbacid’s offer.
“I have tried to get a copy of the agreement between BOC Holdings and Carbacid to no avail. I have written to Capital Markets Authority, BOC Kenya and BOC Holdings requesting this document but nothing has been forthcoming,” Mr Ngugi said.
“How can CMA authorise this transaction without seeing the agreement and making the same available to shareholders?”
The deal between Carbacid and BOC has certain unspecified conditions, including “that the offer is made at Sh63.5 or higher.”
BOC warned potential dissenting shareholders that they could face compulsory buyout or retain stakes in a company whose shares do not trade on the NSE should Carbacid hit ownership thresholds allowing it to delist the medical gases manufacturer or squeeze out its minority investors.
Despite the controversy, Carbacid plans to continue with the buyout and intends to purchase as many BOC shares as will be made available at the Sh63.5 per share offer price.
“The offer is NOT conditional as to acceptances. This means that its success does not depend on the offerors achieving a given level of acceptances,” BOC says in the circular.
Dyer and Blair settled on the fair value per share of Sh91.76 as a middle ground after applying various valuation methods that gave a value range from Sh61.55 to Sh127.4.
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