Wanjui, tycoon pocket Sh3bn in UAP share sale

Businessmen Joe Wanjui and James Muguiyi have completed the sale of a combined six percent stake in insurance firm UAP Holdings to South African multinational Old Mutual Holdings for R437 million (Sh3.2 billion).

Old Mutual announced in August 2018 that it would buy a total of 12.7 million of the insurer’s shares from the two shareholders but only started the purchases last year, according to disclosures in UAP’s latest annual report.

It acquired 2.8 million shares from Mr Muguiyi in the year ended December and purchased the remaining 9.8 shares earlier this year.

The transactions raised Old Mutual’s stake in the insurer to 66.7 percent from the previous 60.7 percent. “The registration process [for the shares] was delayed and spilled over into 2020. That was the delay but they have been paid,” Arthur Oginga, UAP’s chief executive, said.

Mr Wanjui retired as the company’s chairman on June 22 after serving on the board for a total of 35 years.

The businessman started making money trading food coupons near Nairobi’s Khoja Mosque in the 1940s when he was 11 years.

He later credited his success to receiving an American education and a successful career that saw him rise to executive positions at Unilever East Africa and Industrial and Commercial Development Corporation (ICDC).

The State-owned ICDC helped create most of the post-Independence billionaires by funding their ventures in pursuit of the policy of Kenyanisation of the economy.

“Quite a bit of it was luck, but a lot more came through very hard work. Even where luck and circumstance play a role, as they do in any situation, every chance they provide must be pursued and grabbed with both hands,” he writes in his book My Native Roots.

“I took advantage of the many breaks that came my way. Those I missed, I lived to regret. All of us get such breaks –but some people do not recognise them.”

Mr Wanjui was one of the most powerful figures during the administration of Mwai Kibaki who appointed him as Chancellor of the University of Nairobi in 2003.

Mr Muguiyi previously served as UAP’s chief executive from 1988 and 2012. He has interests in several other companies, some of which he has owned jointly with the late business magnate Chris Kirubi.

Mr Muguiyi remains a non-executive director of UAP, which is in the process of merging with the Kenyan units of Old Mutual.

The exact number of shares sold to Old Mutual by each of the two investors was not immediately clear but they were to tender a combined 12.7 million units to the multinational.

Mr Oginga said they both retain minority stakes in the insurer, adding that they did not sell an equal number of shares to Old Mutual.

Before the deals were concluded, Mr Wanjui held 43.25 million shares, equivalent to a 20.4 percent stake through his investment vehicle Bawan Limited.

Mr Muguiyi on the other hand directly held 12.6 million shares amounting to a 5.9 percent stake.

The duo is the latest to reap large profits from UAP following an earlier lucrative exit by Mr Kirubi and a group of institutional investors.

Old Mutual acquired its initial 60.7 percent stake in the insurer in 2015 when it paid Mr Kirubi, Centum Investment Company, private equity firms Africinvest, Abraaj and Swedfund a total of Sh20.4 billion.

This represented a premium of more than 100 percent of the value of their stakes based on the company’s book value at the time.

Mr Kirubi sold his 9.58 percent stake for Sh3.2 billion while Centum disposed of its 13.75 percent equity for Sh4.6 billion.

The PE firms traded their combined 37.33 percent stake for Sh12.5 billion. The Kirubi group sold their UAP shares at a price of Sh180 each.

Mr Wanjui and Muguiyi negotiated a higher buyout price to take into account the passage of time since the initial exit from their fellow shareholders.

“The put option exercise price is equal to the initial price (paid by Old Mutual plc in acquiring its current holding), increased by the Government of Kenya Treasury one year bond rates and reduced by dividends declared by UAP,” the multinational said in earlier disclosures.

“The settlement amount equates to R437 million (Sh3.2 billion), reflecting the contractual discount unwind and the movement in the Kenyan shilling to the rand over the period.”

Old Mutual acquired UAP to boost its market share in the local financial services market. The multinational already owned subsidiaries engaged in investments, insurance and banking, including Faulu Microfinance Bank.

The multinational has been merging its earlier insurance subsidiaries with those of UAP to simplify the business, lower costs and build scale.

Old Mutual Life Assurance Company, for instance, is being merged with UAP Life Assurance Limited in a process expected to be completed by December.