Nairobi Business Ventures (NBV) will give its advisers six million shares as compensation for their services in helping it purchase four companies, marking a rare non-cash payment for professional work among Nairobi Securities Exchange-listed firms.
MW & Company Advocates LLP, Callstreet Research and Analytics and abc Capital are advising NBV in its proposed acquisition of Air Direct Connect Limited, Aviation Management Solutions Limited, Delta Automobile Limited and Delta Cement Limited through a share swap.
“That the board of directors of the company be and are hereby authorised to negotiate professional fees and allot not more than six million (6,000,000) shares in aggregate to all the transaction advisors as non-cash consideration for the professional services provided to NBV on this matter,” reads part of the circular to the firm’s shareholders.
The six million shares, with a current market value of more than Sh30 million, will be equivalent to a 0.44 percent stake in the company once the transactions are completed.
Transaction advisors are typically paid in cash. The move to pay NBV advisors in the form of shares indicates the firm’s quest to preserve cash.
It may also signal that the professional firms are keen to acquire a stake in the company whose stock has rallied as it seeks to transform from a struggling shoe retailing business to industrial concerns. Analysts say the arrangement NBV has with the advisors is unprecedented.
“It is very unusual and presents potential conflicts of interest as the advisors are looking to become shareholders,” a corporate governance specialist told Business Daily.
NBV has not indicated the price at which it will issue the shares to the advisors. The four companies worth Sh3.4 billion to be acquired by NBV are owned by its new chief executive Haresh Soni and his associates who will be issued with a total of 857.6 million shares in the NSE-listed firm as their compensation.
This will lift the ownership of Mr Soni and his associates in NBV to a new high of 94.84 percent.
The proposed transactions come soon after Mr Soni took an initial controlling 84.32 percent stake in NBV at a cost of Sh83 million through his investment vehicle Delta International FZE.
The nature of the transactions show that Mr Soni and his associates are making a reverse takeover of the NSE-listed firm.
This means that the four companies will be brought to the public market without going through the traditional route of an initial public offering (IPO) or listing by introduction.