Old Mutual allays fears over shares sale plan

Old Mutual Kenya last week sought to allay fears of a share buyout plan in its insurance business as minority shareholders kicked up a storm over the deal.

The move by Tidanga Limited which owns 20 per cent of the insurance firm – a subsidiary of Old Mutual Plc- is seen as way of creating liquidity for the insurance firm while giving minority and disgruntled shareholders an exit avenue.

But minority shareholders have raised concern over the deal with particular bone of contention being the Sh30 Tidanga Ltd is offering minority shareholders for their stake in Old Mutual Life Company.

In a press statement released on Friday, Old Mutual Kenya’s chief executive officer Tavaziva Madzinga moved to dispel claims that the deal offered the minority shareholders was unfair.

“It is important to note that the minorities have no pre-emptive rights and the allocation of shares is at the full discretion of the board.

However, the offer seeks to give minorities a fair chance to participate in the recapitalisation of OMLAC effectively putting them back in the same position as before Tidanga in terms of the shares they own thereby negating any dilution,” said Mr Madzinga

Optional offer

According to him, minority shareholders can therefore accept to purchase extra shares, sell their shares or do nothing and retain their existing holding as the offer is optional.

“The issue of shares and injection of capital would alter the share value price hence the offer of Sh30 per share,” said Mr Madzinga.

Tidanga Ltd owns about 11.1 million ordinary shares valued at Sh10 each in the firm’s share capital.

OMLAC’s minority shareholders – a number of whom came on board during Old Mutual’s demutualisation 1999- number about 1500 with the highest shareholding held by one investor currently standing at 0.4 per cent.

With no pre-emptive rights of their own, minority shareholders will either have to take up the rights on offer or sell them to Tidanga Ltd.

Coming at time when OMLAC is seeking a new lease of life after years declining earnings, dry dividend taps and stormy annual general meetings, Tidanga Ltds bid to buy out an estimated Sh77.8 million worth of shares held my minority shareholders will inject funds to rev up the firm’s earnings.

In the offer, Tidanga Ltd. gave minority shareholders the option to sell all but not some of their shares in the insurer to the firm upon the terms and conditions set out in an offer letter sent out last week.

Another option on the table is for minority shareholders buy from Tidanga Ltd. up to a further 2 shares for every existing share they hold in OMLAC.

OMLAC has an estimated share capital of Sh555 million. Old Mutual Plc owns 66 per cent of the insurer while minority shareholders control a 14 per cent stake in the firm.

While it remains unclear who owns Tidanga Ltd., the firm’s formation came about as a statutory requirement to have a local shareholders own at least a third of the share holding in any insurance company operating in Kenya.

With an estimated Sh84 billion under management, Old Mutual Kenya will be hoping that the fresh cash and an airtight strategy will stem losses in its life business while spurring tidy returns in the investments and fund management side of its business.