State to net Sh1bn from share sale in six listed firms

Eveready East Africa’s premises in Nakuru.  

Photo credit: File | Nation Media Group

The government is set to unlock at least Sh999.1 million from the sale of its shareholding in six listed companies following Cabinet approval of the planned transactions.

The Cabinet on Tuesday approved government divestiture in East African Portland Cement (EAPCC), Nairobi Securities Exchange(NSE), Stanbic Holding and Housing Finance, Liberty Holdings, and Eveready.

According to NSE data, the government shareholding in the six companies was valued just shy of Sh1 billion as of Tuesday with about half of the value or Sh500 million representing the State’s 1.1 percent stake in Stanbic Holdings.

The government’s 52.3 percent shareholding in EAPCC is valued at Sh334.1 million based on the company’s share price of Sh7.10.

The value of government shareholding in the four other companies is meanwhile lower at Sh53.5 million for the NSE, Sh40.8 million for the Housing Finance Group, Sh43.3 million for Eveready East Africa, and Sh27 million for Liberty Holdings.

The sale of the shares is expected to be conducted via trades at the NSE guided by transaction advisers.

“Once you have an adviser in place, they would advise on the methodology of sale which could likely be an auction,” noted Eric Musau, the executive director for research and sustainable finance at Standard Investment Bank (SIB).

The government divestiture from EAPCC is widely expected to end a tug-of-war between the State and Lafarge which holds a 41 percent stake in the manufacturer via various entities including Bamburi Cement.

In recent years, the government has pressured the French conglomerate to dilute its interest in the company on anti-trust laws.

Lafarge has, for instance, been accused of damaging EAPCC to protect its interest in rival Bamburi in which it holds a 58.9 percent stake. The sale of government shareholding in the other five companies is not expected to widely result in drastic changes to their ownership structures.

The divestiture is meanwhile set to unlock funding for the State around the prevailing market value of the listed entities even as bulk share sales present the opportunity for locking in a premium price.

“On whether the government fetches a discount or premium, I think it could fetch a premium from the sale of shareholding in EAPCC as its represents a bulk sale of shares warranting a higher return as seen in recent transactions such as I&M and EABL,” added Mr Musau.

The sale of shares represents one of multiple privatisation methods with others being negotiated sales resulting from the exercise of pre-emptive rights, the sale of assets including through liquidation, and any other method the Cabinet approves.

This publication could not immediately establish whether Lafarge holds pre-emptive rights on the sale of EAPCC shares.

According to the Privatization Authority, the benefits of divestitures include the reduction in the demand for government resources, enhancement of capital markets, and the generation of resources.

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