UK-based financial services group Old Mutual has acquired a majority stake in UAP Holdings after signing to buy out three private equity firms that hold a combined 37.33 per cent stake in the Kenyan firm.
The multinational will pay Africinvest, Abraaj and Swedfund $155.5 million (Sh14.2 billion) in the transaction that will raise its interest in UAP to 60.66 per cent.
The new deal comes weeks after Old Mutual bought into UAP with the acquisition of a combined 23.33 per cent stake from investment firm Centum and director and businessman Chris Kirubi for $97.6 million (Sh8.9 billion).
“We are delighted to have secured a majority stake in UAP,” said the Old Mutual Plc chief executive Julian Roberts in a statement.
“East Africa is a core growth market for Old Mutual and this transaction is a critical step in Old Mutual becoming an African financial services champion.”
The transaction raises the multinational’s total investment in UAP to Sh23 billion, underlining its deepening exposure in the local financial services sector.
Old Mutual last year bought a 67 per cent stake in microfinance institution Faulu Kenya for Sh3.6 billion, expanding its local financial services beyond stock brokerage, insurance and asset management.
The series of transactions have effectively made UAP a subsidiary of Old Mutual, which now has billionaire investor Joseph Wanjui as its single-biggest individual shareholder in the company.
Mr Wanjui, who is also the chairman of UAP, holds a 20.46 per cent stake through his investment vehicle Bawan Limited.
Mr James Muguiyi, former chief executive of UAP, holds a 5.97 per cent equity stake while William Kimutai has a 1.65 per cent stake.
Mr Andrew Smith has a 0.85 per cent interest in the firm, ahead of hundreds of other individual investors that own a combined 10.41 per cent stake.
Mr Wanjui said UAP would proceed with earlier plans to list on the Nairobi Securities Exchange despite Old Mutual’s acquisition of a majority stake.
“Nothing changes with this transaction. We are still keen on listing,” he said, adding that the company would try to meet the target of joining the Nairobi bourse later this year. UAP is currently trading on the over-the-counter (OTC) market at Sh140.
Listing on the NSE is expected to boost liquidity of the company’s shares and ultimately make it easier for institutional and retail investors to exit.
Old Mutual’s buyout of the PE funds underlines the large profits earned by international institutional investors from their medium-term ventures in the Kenyan market.
Africinvest, Aureos, and Swedfund invested Sh4.6 billion in UAP in 2012 by advancing a convertible, interest-earning loan at an annual rate of five per cent.
The PE funds converted their debt to equity in the same year, taking significant stakes that they have now sold to Old Mutual at a big profit.
The Sh14.1 billion buyout price represents a 209.6 per cent gain on the original investment, excluding dividend income over the years.
The transaction was priced at a premium of 28.9 per cent on UAP’s current price of Sh140 per share at the OTC, about the same as the Centum/Kirubi deal that had a premium of 28.5 per cent on the market price.