Businessman Chris Kirubi has moved to buy back the 51 per cent Haco Industries stake he sold to South Africa’s Tiger Brands in 2008.
The deal, which comes barely two years after the billionaire disagreed with the South African firm over the company’s strategic direction, will see Mr Kirubi’s interest in Haco rise from the current 49 per cent to 100 per cent.
It was not possible to immediately establish how Tiger Brands has priced the stake it bought from Mr Kirubi for about Sh363 million, but sources indicated that the businessman is paying a premium for total control of the company.
“I like my business. I’m taking back my business, that’s all,” Mr Kirubi, who declined to disclose the exact buyout price, told the Business Daily, adding that the transaction still needs regulatory approvals and will be completed soon.
Tiger said it no longer supports Haco’s model of manufacturing and distributing various consumer goods under licence, adding that it wants to focus on its own fast moving consumer goods brands.
“In addition to products manufactured and marketed by Haco under its own brands, the majority of Haco’s business lies in the manufacture and distribution of products under licence, which is not aligned with our current operating model of owning leading FMCG brands,” Tiger said in a filing with the Johannesburg Stock Exchange (JSE).
Haco has agreements with several multinationals to manufacture and sell their brands in Kenya and East Africa.
The company, for instance, deals in Palmer’s Cocoa Butter (under licence from E.T. Brown Drug Company) and BIC ball pens (Societe BIC) and washroom cleaner Jeyes Bloo (Jeyes Plc).
Tiger said the entrenched partnerships that Haco has developed over the years have made it difficult to boost the uptake of its brands, including Purity (baby food), Ingram’s (personal care) and Tastic (cereals) in East Africa. Mr Kirubi, on the other hand, believes in the current model that has helped Haco grow since its establishment in the early 1970s, prompting him to buy out Tiger Brands to maintain the status quo.
“Taking into account these factors, it was decided that Haco would be better positioned under local Kenyan leadership and control,” Tiger said in the statement.
“This has culminated in the local partner making an offer for Tiger Brands’ 51 per cent shareholding, at a price that was considered fair and reasonable.”
The South African firm said its earnings and asset base will not be materially affected by the Haco divestiture, which is part of a plan to exit difficult markets.
Tiger last year started the process of selling its 51 per cent stake in Ethiopia’s East African Tiger Brands Industries in a deal that wrote the script for the pending breakup with Mr Kirubi.
It remains to be seen whether Tiger Brands will re-enter the Kenyan market on its own or through a partnership with another company.
Mr Kirubi said there are no hard feelings. “I have no issue with them and they have no issue with me,” he said.
Tiger was previously bullish about the Haco partnership, but has over the past two years soured on the investment, starting with the discovery of what Tiger said was an R106 million (Sh845 million) fraud at the company in 2015.
The accounting fraud that came in the form of pulling forward sales and falsification of stocks, cost the multinational R50 million (Sh400 million) at group level as the subsidiary sunk into an undisclosed loss in the year ended September 2015.
Tiger shared that loss with Mr Kirubi, pulling its after-tax profit down to R942 million (Sh7.5 billion) from R1.8 billion (Sh14.3 billion) the year before.
Haco immediately fired executives associated with the financial scam, putting Mr Kirubi who had rooted for Kenyans to retain top management roles at Haco in a tight spot.
The executives were accused of overstocking major distributors to create the impression that they had met their performance targets.
Taking back control of Haco signals Mr Kirubi’s confidence in the company’s future prospects. Tiger says Haco’s financial performance peaked in 2013.
The company’s most valuable brands include BIC pens and shavers, Black Silk and Miadi (hair care) and So Soft (laundry).
Conclusion of the deal is likely to cause a change in the company’s name, which Tiger had rebranded to Haco Tiger Brands to reflect the change of control. The buyout of Tiger at Haco will boost Mr Kirubi’s portfolio of private companies, which includes Bayer East Africa and International House Limited.
The billionaire’s interest in publicly traded firms is currently concentrated in Centum Investments where he is the largest single shareholder with a stake of about 30 per cent.