The Capital Markets Authority Tribunal has dismissed businessman Ngugi Kiuna’s appeal challenging Carbacid Investments’ buyout of BOC Kenya, citing undervaluation and alleged disregard for the interests of minority shareholders.
Mr Kiuna, a former BOC Kenya chairman, challenged the takeover that was initiated in November 2020, arguing that Capital Markets Authority (CMA) erred in approving the buyout by ignoring the undervaluation of the target company, in which he holds an 11.2 percent stake.
Carbacid and its affiliate Aksaya Investments LLP offered to buy 100 percent of BOC Kenya at a price of Sh63.5 per share or a total of Sh1.2 billion. Dyer and Blair Investment Bank, the independent adviser hired by the board of BOC Kenya, said the offer undervalued the company, which had a per share value of Sh91.76 as of early 2021.
The board told shareholders to make up their own mind with regard to the fairness of the offer. Mr Kiuna has meanwhile been buying more shares of BOC Kenya.
The tribunal, chaired by Paul Lilan, dismissed the appeal last week, saying the process complied with the provisions of the Capital Markets Act and the Capital Markets (Take-overs and Mergers) Regulations in regards to the takeover transaction.
The tribunal further said that the evaluation of whether a takeover offer is a good or bad is left solely to the shareholders and only the members of a company can decide whether to enter into a contract or not.
“It is clear that the 1st respondent (CMA) cannot interfere with the internal dealings of a company by evaluating whether the share price quoted by the offeree is a good or bad offer. An alternative interpretation would be inviting the regulator to descend into the ring,” the tribunal said.
Following the publication of the buyout offer, Mr Kiuna made a request to BOC Kenya to provide the current market valuation of all the land and assets held by the company, but this was not done.
He said he also requested for an extraordinary general meeting on January 16, 2021 after noting the concerns about the takeover, while requesting to halt the process on the basis that material information, including the irrevocable undertaking (agreement between the offerors and BOC Kenya's parent firm), was being withheld from the shareholders.
The tycoon later challenged the regulator's approval on the grounds that it was granted without considering whether the rights and interests of the minority shareholders were protected in the proposed takeover.
It was his argument that the CMA has a role in ensuring there is fairness in the transaction so that investors, and particularly the minority shareholders are protected.
The regulator contended that there was no cause of action made out against it in the appeal.
Through lawyer Timothy Githendu, CMA said the protection of investors’ interests involves protection of minority shareholders and requires the interrogation of the details of the takeover offer such as the fairness of the proposed buyout price.
Mr Githendu said the regulator followed all the provisions of the Capital Markets (Take-overs and Mergers) Regulations 2002 ensuring that all the relevant and material facts had been provided before granting approval.
The regulator added that its powers in a takeover transaction are limited as it does not interfere with the arrangements of investors in the market, which have not been found to be illegal.
This is because the CMA recognises that parties have the freedom of contract and it cannot interfere with the private arrangements of investors in the market which have not been found to be unlawful.
