Industry

Mumias Sugar deal opens billionaires war, Rai family rift

mumias

Entrance gate at Mumias sugar company. PHOTO | ISAAC WALE | NMG

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Summary

  • Sarrai Group, which is associated with Kenyan businessman Sarbi Singh Rai, placed the third-highest bid of Sh11.5 billion in the lease battle that attracted businessman Julius Mwale, who placed the highest bid of Sh27.6 billion.
  • The award of the lease underlines the infighting in the billionaire Rai family and sets the stage for court action as Mr Mwale threatened to contest the award to Sarrai Group in court.

Kenyan billionaires have lost in the race to lease Mumias Sugar after KCB Bank-appointed #ticker:KCB receiver-manager tapped Uganda-based conglomerate Sarrai Group to run the ailing miller for 20 years.

Sarrai Group, which is associated with Kenyan businessman Sarbi Singh Rai, placed the third-highest bid of Sh11.5 billion in the lease battle that attracted businessman Julius Mwale, who placed the highest bid of Sh27.6 billion.

Sarbi’s siblings, through West Kenya Sugar, and under the watch of his brother Jaswant Rai, offered Sh3.5 billion with steel tycoon Narendra Raval placing a bid of Sh8.4 billion in a contest that attracted eight bidders.

The award of the lease underlines the infighting in the billionaire Rai family and sets the stage for court action as Mr Mwale threatened to contest the award to Sarrai Group in court.

The 20-year lease, however, excludes assets in the firm’s ethanol and power generation plants, which were last month seized from KCB Group by Ecobank and French development financier, Proparco, which are owed Sh2 billion and Sh1.9 billion respectively.

On Wednesday, Mr Mwale through his firm, Tumaz and Tumaz Enterprises, protested the selection of Sarrai Group, saying the bidding was not transparent.

The protests underline months of the behind-the-scenes fight for the control of the once top miller by wealthy investors.

“We are moving to court immediately to challenge this process because the receiver-manager was not transparent in his evaluation of the bids. I am confident that the court will stop this process given that there is enough evidence to show that the process was flawed,” said Mr Mwale in an interview.

The miller was in September 2019 placed under receivership by KCB Group to protect its assets and maintain its operations.

Its shares were then suspended from the Nairobi bourse, and the leasing deal will be keenly watched by shareholders, including the State with a 20 percent stake, and creditors who are owed more than Sh11 billion.

“The lease is in the interest of all stakeholders and in conformity with the recent court ruling dated November 19, 2021. The lease, however, does not include the Ethanol and the Cogen plants,“ the receiver-manager, Ponangipali Rao, said in the announcement yesterday.

Sarrai Group is a Ugandan conglomerate consisting of different agro-manufacturing companies, which run three sugar factories in the neighbouring country, producing about 170,000 tonnes of sugar annually. It also has operations in Malawi.

The receiver-manager said the multinational was best placed to revive operations of the ailing miller, owing to its expertise in the field, as shown by its performance in Uganda.

For Sarbi, the Mumias Sugar deal set the stage for market share war with his brother and billionaire Jaswant whose family controls half of the commodity’s sales in Kenya.

Rai family firms — West Kenya, Sukari Industries and Olepito — have taken the market previously occupied by Mumias with their Kabras Sugar brand. At its peak, Mumias had more than 60 percent market share.

Mr Sarbi and Jaswant took different paths in the wake of family disagreements that have culminated in a vicious court fight for the control of the Rai family’s multibillion-shilling estate.

Sarbi’s two brothers teamed up with their mum to take on their brother Jaswant over the distribution of wealth left behind by their father.

At the centre of the dispute is the Will dated December 17, 1999, allegedly left behind by Tarlochan Singh Rai, who died on December 28, 2010, in Mumbai, India.

Jaswant, the chairman of Rai Group, is the executor of the Will.

The widow, Sarjij Kaur Rai, together with her sons, Jasbir and Iqbal, have objected to the Will, saying the patriarch could have been coerced in crafting the document that distributed his assets among his eight beneficiaries.

Both Jaswant and Sabri have made Press comments disassociating with each other, underlining the rift in the Rai family.

Mr Sarbi is not part of the court fight and has built for himself a multi-billion shilling empire dealing in sugar, timber, cement manufacturing and flour milling, with his Kenya’s flagship being Rai Cement and Comply Industries.

A total of eight investors submitted bids in a public effort to lease the troubled sugar factory. The second-highest bidder was Kruman Finances, who wanted a 25 year-lease with Sh19.7 billion. Kruman Finances is associated with French and Turkish investors.

Other bidders were Pandhal Industries with Sh9.7 billion over 20 years and Kibos Sugar with Sh8.8 billion.

A Mauritius-based company, Sucrie Des Mascarelgnes Ltd, also participated but did not disclose the value of its bid.

Mr Raval, through his Devki Group, had in June pulled out of the Mumias bid after political leaders from western Kenya questioned the process of reviving the miller

The Devki Group owner was planning to inject Sh5 billion to return the once giant miller to production.

Mr Raval, who made his initial fortune in the steel industry before moving to cement production, was betting on Kenya’s agriculture sector, and his first step was sugar milling.

Mr Mwale has also unveiled a multi-billion shilling package that he says will lead to the upgrade of the rundown production plant and attract farmers back to cane production.

A former air force engineer, he is behind the so-called Mwale City that seeks to transform Lunza, a sleepy village in Kakamega County, into a ‘Silicon Valley’ worth at least Sh200 billion.

Unlike the other State-owned sugar firms where the bidding was through public tendering, the receiver-manager said the Mumias issue was handled through a private treaty between the investor and the bidders.

“Receiver was of the opinion that a private treaty is a much better option instead of public tendering. In addition, the private treaty will be less expensive, much faster and the receiver would be able to conclude the technical and financial assessments of the bidders in the shortest period,” said Mr Rao.

* Updated