Nairobi bourse-listed automotive and engineering products seller Car & General (C&G) #ticker:C&G earned Sh412 million from the sale of a 50 per cent stake in its Cummins engines and generators distribution business to the franchise owner Cummins Inc, the company disclosed in its latest annual report.
The firm shifted from full ownership of the business to holding a 50 per cent equity in Cummins C&G Holdings Limited, the joint venture that the parties formed in April last year.
“Consideration paid to Car & General (Trading) Limited was 50 per cent of net assets plus USD 1,900,000,” the company said of the deal.
C&G says the joint venture had net assets of Sh444.8 million as of September last year, placing the value of half of the book value that it was paid at Sh222.4 million.
The additional $1.9 million (Sh190 million) payout raised the total proceeds to Sh412 million. C&G says it booked a gain of Sh187.1 million in the transaction.
The deal with Cummins has taken away half of what C&G used to earn from distribution of the Indiana-based multinational’s diesel engines, turbochargers, alternators and generators.
Cummins products have been the mainstay of C&G’s equipment business, which includes distribution of TVS motorcycles and Toyota forklifts.
The joint venture had sales of Sh545.1 million in the six months ended September 2017 when it made a loss of Sh11.8 million.
The listed firm, whose business spans poultry farming and real estate, was appointed Cummins’ distributor in 2006.
The move to form a joint venture with Cummins came after C&G said it was facing increased competition from rival equipment manufacturers and dealers.
The partnership has consolidated the sales, service and support of Cummins products –— in East Africa.
The territory comprise 11 countries –Kenya, Tanzania, Uganda, Ethiopia, Djibouti, Seychelles, South Sudan, Rwanda, Somalia, Eritrea, and Burundi.