The government has kicked off the sale of its stake in five hotels, including the Kenya Safari Lodges, Mt Elgon Lodge Limited, Golf Hotel Limited, Sunset Hotel, and Kabarnet Hotel.
The Privatisation Authority on Tuesday invited consultants to guide on the sale of the Kenya Development Corporation (KDC) controlled hotels.
The move comes weeks after the Cabinet gave a green light for the sale of six State-owned enterprises, including the five hotels, which is expected to spur the expansion of the hospitality industry through private capital.
“The authority requires transaction advisory services that involve the review of financials, industry analysis, commercial, operational, regulatory and legal for the KDC-controlled hotels,” said the Privatisation Authority in a tender call.
Other shareholders of the Kenya Safari Lodges & Hotels Limited will have pre-emptive rights to acquire the remaining shares of the hotel chain from the KDC, failure to which the sale of the shares shall be done through an open tender.
A pre-emptive right is a provision to existing shareholders in a corporation to purchase newly issued stock before it is offered to others. The right protects current shareholders from dilution in value or control.
The Kenya Safari Lodges and Hotels Limited incorporates the Mombasa Beach Hotel, Ngulia Safari Lodge, and the Voi Safari Lodge.
The sale of shares in Mt Elgon Lodge Limited, Gold Hotel Limited, and Sunset Hotel is expected to be conducted via an open tender, while the disposal of Kabarnet Hotels Limited will be via the sale of assets.
According to the KDC’s annual report for the fiscal year ended June 2023, the development finance institution disclosed 5.2 million units of shares representing direct or effective shareholding in the five hotels.
The value of the shares rounded off to Sh671.9 million, with the bulk of value tied in the Golf Hotel Limited at Sh608.9 million.
The Privatisation Authority will rely on a business valuation or share equity valuation report from the sought-after consultant to determine the execution price in the sale of the five hotels.
“In this respect, the advisers will be expected to build an appropriate financial model for use in the valuation of the companies.
“Based on the valuation, propose a share price that will assist the authority in implementing the transaction,” added the Privatisation Authority.
The sale of the State’s stake in the five hotels will reduce the government’s financial exposure to the hospitality industry.
However, the government will retain some grip in the sector through shares held in International Hotel (Kenya Limited), Kenya Hotel Properties (Intercontinental Nairobi), Mountain Lodge Limited, and Maralal Safari Lodge Limited.
The KDC also has stakes in Ark Limited, Buffalo Springs Lodge Limited, and the Bomas of Kenya Limited.
The privatisation of the five hotels will provide further impetus to the recovery of the tourism sector from the effects of the 2020 pandemic.
“This move aligns with the ongoing rebound of the tourism sector that has been buoyed by the Visa-free entry regime in Kenya, and promises to deliver increased employment opportunities in both the divested enterprises as well as across the entire tourism sector,” the Cabinet noted in a February dispatch.
Last month, the Cabinet also gave the green light to the privatisation of the Development Bank of Kenya, bringing the number of entities set for sale to 17.
Earlier on, the State had set sights on privatising 11 entities, including the Kenya Literature Bureau (KLB), Kenyatta International Conference Center (KICC), Kenya Seed Company Limited, Kenya Pipeline Company, and the New Kenya Co-operative Creameries (New KCC).
The National Oil Company of Kenya, the Numerical Machining Complex, Kenya Vehicles Manufacturers Limited, and Rivatex East Africa Limited were also on the shortlist for privatization before a High Court order freezing the move.
