Resolution CEO set to earn millions from sale of stake
Resolution Insurance CEO Peter Nduati. He now co-owns 40pc stake in the insurer with John Mwangi. PHOTO | FILE
What you need to know:
Peter Nduati, the CEO and founder of the insurance company, recently bought out private equity firm African Development Corporation (ADC) and long-term shareholder George Kahira as part of the complex transaction that concluded Thursday with the announcement that Leapfrog would be buying 60 per cent stake.
Mr Nduati confirmed the deal, but declined to disclose how much profit he will earn from the transaction.
ADC says it exited Resolution as part of its strategy to focus on banking in the continent.
Businessman Peter Nduati is set to earn millions of shillings from the just concluded sale of a 60 per cent stake in Resolution Insurance, which will see private equity firm Leapfrog spend Sh1.6 billion to acquire a majority stake in the company.
Mr Nduati, the CEO and founder of the insurance company, recently bought out private equity firm African Development Corporation (ADC) and long-term shareholder George Kahira as part of the complex transaction that concluded yesterday with the announcement that Leapfrog would be buying 60 per cent stake.
ADC’s stake was 38.74 per cent while the one held by Mr Kahira was not disclosed.
“LeapFrog is acquiring a majority ownership stake from a consortium led by Mr Nduati,” said a statement issued by the parties on Thursday.
Mr Nduati confirmed the deal, but declined to disclose how much profit he will earn from the transaction. He and former Equity Bank executive John Mwangi now own a combined 40 per cent stake in Resolution, leaving them as the only co-investors with LeapFrog.
The deal is reminiscent of billionaire investor Naushad Merali’s boardroom manoeuvres that earned him billions of shillings in takeover deals involving international telecoms firms Vivendi and Celtel in 2004.
Mr Merali, who was a minority shareholder in KenCell, used his pre-emptive rights to buy the 60 per cent stake that Vivendi had put up for sale at $230 million and within hours flipped it to Celtel for $250 million, earning a quick $20 million (Sh1.8 billion) profit.
ADC’s exit from Resolution is the latest example of the lucrative returns PE firms are earning from their medium-term investments in fast-growing Kenyan firms.
The Frankfurt-based firm says it earned a return of 16 per cent compounded annually, effectively growing its total investment of about €3.8 million (Sh425.6 million) by 70 per cent in four years to €6.4 million (Sh723.5 million).
“The sale represents another profitable exit for ADC, resulting in an internal rate of return of 16 per cent and a multiple of 1.7 times on its total investment amount,” the firm said in a statement.
ADC says it exited Resolution as part of its strategy to focus on banking in the continent.
The Sh1.6 billion investment by LeapFrog includes additional capital injection into Resolution to fund growth. The PE firm’s executives, however, did not disclose the split between the cost of the acquisition and the extra capital inflow.
The transaction comes soon after LeapFrog exited insurance holding company Apollo Investments in October when it sold its 26.9 per cent stake to SwissRe Direct, cashing in on the investment it made in 2011.
“Our investment positions Resolution to take the next leap in its growth, and we look forward to working with them to expand their reach in health insurance and beyond,” LeapFrog partner Dominic Liber said in a statement.
Resolution, whose biggest business is medical insurance targeting the middle class and medium-sized firms, made an after-tax loss of Sh116.7 million in the half-year ended June.
It is focusing on diversifying into the wider general insurance business including accident covers.
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