ICEA Lion Insurance Holdings, which is controlled by the family of the former Central Bank of Kenya governor Philip Ndegwa, is set to raise Sh2.4 billion from the sale of a 24.1 percent stake to private equity firm Leapfrog Investments.
Regulatory filings seen by the Business Daily revealed the payout by the private equity fund — the latest deal in the continuing shake-up of the Ndegwas’ multibillion-shilling business empire involving the sale of struggling assets and the bringing on board of deep-pocketed partners in high-value segments.
Leapfrog is using its investment vehicle Eastern Africa Holdings Limited for the buyout that valued the ICEA Lion Insurance Holdings at Sh10 billion.
The Ndegwas, one of the richest families in Kenya, have proposed or completed five disposals and mergers in the past five years, including the October 2019 merger of NIC Group and CBA to form NCBA Group #ticker:NCBA.
This is also the latest deal in the Kenyan market for Leapfrog, which has previously bought and sold insurers including Apollo Investments Limited – the parent company of APA Life and APA Insurance.
Leapfrog has partnered with New Jersey-based insurer Prudential Financial Inc in the ICEA deal. The transaction comes after the two multinationals announced in 2016 that they would make joint investments of $350 million (Sh37.5 billion) in life insurance companies in Ghana, Kenya, Nigeria and other African markets.
For the Ndegwas, the deal with Leapfrog marks the latest transaction in their diversified portfolio, which straddles manufacturing, real estate, logistics, insurance and banking.
The family’s strategy has been defined by selling struggling assets and pursuing mergers and acquisitions in sectors with high-growth potential.
"Quite apart from the capital investment Leapfrog will make, the group will have access to the vast capabilities of both Leapfrog and Prudential Life as we seek to innovate and grow," ICEA Insurance Holdings chairman James Ndegwa wrote to the company’s staff.
One of the holding company’s subsidiaries, ICEA Lion Asset Management, is concurrently moving to conclude its buyout of Stanlib Kenya for an undisclosed sum as it seeks to build scale in the fund management business.
The deal will raise ICEA’s managed funds to more than Sh200 billion compared to the previous estimate of Sh143 billion.
Increased competition and stagnant fees in the fund management industry means players managing larger asset pools are best positioned to cover costs and generate profits.
Fund managers in general are also expected to benefit from a rise in retirement savings, insurance premiums and capital from high-net-worth individuals in the coming years.
The Ndegwas also led the merger of the former NIC Group and CBA Group last year to create NCBA Group which now ranks as the third-largest bank by assets (Sh509 billion as of March, 2020).
The family ended up with an 11.6 percent stake in the merged bank, which is keen on replicating the benefits enjoyed by top rivals KCB Group #ticker:KCB, Equity Group #ticker:EQTY and Co-operative Bank #ticker:COOP.
The major retail banks enjoy economies of scale and have diverse revenue streams, including fees earned on millions of transactions. Their cost of funds is also relatively lower because of the large number of savings accounts which don’t earn interest.
The Ndegwas have also sold some of their assets in recent years. The family, for instance, in 2015 sold ICEA Building in Nairobi’s central business district to Jomo Kenyatta University of Agriculture and Technology for Sh1.8 billion, leading to its renaming as JKUAT Towers.
The building’s sale was followed by the disposal of Ennsvalley Bakery to Unga Group —a company in which the Ndegwas have a controlling 50.93 percent stake.
The transaction was done in two tranches between 2016 and 2017 for a total of Sh535 million.
The family in 2018 also backed Delaware-based conglomerate Seaboard Corporation to buy out Unga Group’s minority shareholders and delist the miller from the Nairobi Securities Exchange but the deal failed.
The plan was thwarted after some of the small shareholders refused to sell to Seaboard, denying the multinational the 75 percent target. The minority investors argued that Seaboard’s offer of Sh40 per share undervalued the miller by a large margin.
Unga, for instance, was found to be worth up to the equivalent of Sh67.19 per share.
Seaboard said it wanted to take Unga private because the miller was suffering from its status as a listed firm.