- Since the announcement of Carbacid Investments PLC intending to acquire 100 percent shareholding of BOC Kenya Plc, there has been concern that the market will fall into the hands of a monopoly.
- Evaluation of antitrust issues and monopolistic tendencies need economic lens first before the interpretation of the law applies.
- Concern has been that the gas market in Kenya will be left in the hands Baloobhai Chotobhai Patel, who is the leading shareholder of Carbacid, if the acquisition goes through.
Since the announcement of Carbacid Investments PLC intending to acquire 100 percent shareholding of BOC Kenya Plc, there has been concern that the market will fall into the hands of a monopoly.
It reminds me of Tuskys announcing its intention to acquire Nakumatt and the uproar that the takeover would be creating a monopoly. Reports that the Competition Authority of Kenya vetoed the deal on this ground reinforce my argument that the regulator should have more economists than lawyers.
Evaluation of antitrust issues and monopolistic tendencies need economic lens first before the interpretation of the law applies.
The supermarket retail subsector is too fragmented across the country to be monopolised. The merger of Nakumatt and Tuskys only threatened the top tier market.
There are hundreds of small supermarkets spread across the country. But the regulator went with the noise and petition by competitors in making the decision.
Those are the same misleading voices that are now being raised about BOC Kenya’s acquisition by Cabarcid.
Concern has been that the gas market in Kenya will be left in the hands Baloobhai Chotobhai Patel, who is the leading shareholder of Carbacid, if the acquisition goes through.
To start with, 3,000 Kenyans are holding shares in the listed company through NSE trade. Aside from that, the gas mining and production is not Patel’s tool of business to say that a sector will be in one person’s hands. In fact, the board of Carbacid just like any publicly listed company runs independently in the interest of all shareholders.
The second issue is that we need to differentiate the markets that these two companies operate in. On face value, the two companies seem to be direct competitors, but they are not.
Carbacid has established itself in a particular niche of the gas market, which is mining and producing food-grade carbon dioxide extracted from natural underground reservoirs and then processing for sale.
Carbacid operates two mines — one in Kereita (Kiambu), which serves the Kenyan market, and the other in Sosiani (Eldoret) which serves Uganda and Western Tanzania.
Put together, the two mines have the capacity to meet regional demand, with Carbacid suppliying carbon dioxide to markets including DRC, Djibouti, Malawi and other Southern Africa countries — 50 percent of its revenues comes from exports.
BOC Kenya is a leading supplier of industrial, medical and special gases as well as related equipment and services. Their products are bulk gases, including Oxygen, Nitrogen and LPG. But it doesn’t handle Carbon dioxide. So, to say the two are competitors and the acquisition will lead to market concentration is similar to accusing a media company running a print business of market concentration for acquiring a broadcast company.
There is no incentive for Cabarcid to ground operating capability of BOC Kenya to remain the top gas producer. It will be a case of Carbacid throwing good money after bad because BOC Kenya gives them ground to expand their capacity into the Oxygen market in the region.
One of the constraints BOC Kenya faced was that due to the greenfield investment strategy of the parent company having a subsidiary in every country, it wasn’t able to diversify its markets by exporting its products whilst at the same time facing stiff competition from cheap imports from markets like Dubai.
And now due to the pandemic hospitals which are some of the top clients are producing their own oxygen by investing in oxygen generator plants.
With BOC Holding Ltd, the group company, exiting various markets in Africa like Nigeria, Uganda, Tanzania and Kenya, there is an opportunity for 3,000 Kenyans together with Patel and other shareholders to enter the oxygen market and exploit the vacuum left in the region.
They shouldn’t be punished for being ambitious by the regulator as long as the acquisition deal is above board.