Businessman Peter Munga has sold Sh1.3 billion worth of shares in financial services firm Britam #ticker:BRIT in a deal that has reduced his stake in the company, which has attracted major institutional investors in the past one year.
The shares sale is disclosed in the Nairobi Securities Exchange-listed firm’s latest annual report, which says Mr Munga sold 104 million Britam shares in the year ended December 2017.
The transaction has seen Mr Munga’s stake in the company drop to 26.8 per cent from 40.3 per cent in 2016. The shares sale comes at a time when Britam has raised Sh9.2 billion by issuing new stocks to International Finance Corporation (IFC) and private equity firm AfricInvest.
Mr Munga is expected to have sold more Britam shares in subsequent months to meet his self-imposed August 2018 deadline to dispose of the 452.5 million shares he acquired in 2016 from the company’s former director and Mauritian national Dawood Rawat.
He bought the shares from the government of Mauritius, which had seized and sold several of Mr Rawat’s assets after he was accused of running a $693 million (Sh69.3 billion) Ponzi scheme in the island nation.
A total of 41.1 million Britam shares, for instance, were sold on May 9 and it was not immediately clear whether Mr Munga was among those selling.
The Rawat shares were acquired through Plum LLP, an investment vehicle, whose holding of Britam shares dropped to 348.5 million in December 2017 from 452.5 million the year before.
Mr Munga had promised to hold the shares temporarily, adding that the transaction was motivated by a desire to eliminate investor uncertainty arising from Mr Rawat’s troubles at the time.
“It is not our intention to hold the acquisition shares for the long term,” Mr Munga said through Plum LLP when the deal was announced in July 2016.
“The purpose of the proposed shares acquisition is to allow Britam and its shareholders the time they require to identify a suitable investor.”
Mr Munga was not available for comment.
The price at which he bought the shares was not disclosed, but the businessman is expected to make a significant profit from the share sale.
Britam’s founders, including Mr Munga, have continued to reduce their stakes in the company since it went public in 2011, earning hundreds of millions of shillings from the disposals.
The company’s shareholder list has mostly been dominated by local billionaire investors such Jimnah Mbaru, Equity Bank’s #ticker:EQTY CEO James Mwangi and its chief executive Benson Wairegi.
IFC, which has acquired an 8.8 per cent stake in the insurer, wants the company’s founders to maintain a combined stake of at least 20 per cent up to October 2019, as parts of the measures to demonstrate the founders’ commitment to the business.
AfricInvest was recently allotted a 14.3 per cent stake in Britam, further diluting the equity of the founders.
IFC earlier said it could gatecrash into Mr Munga’s exit trades if the businessman gets good buyout offers.
“If any key shareholder wishes to transfer his shares to an investor under the terms of an approved private transaction, or to a strategic investor through any means, IFC shall have the right to tag along on such a transfer on the same financial terms as shall apply to the key shareholder,” Britam said in a circular detailing the institution’s investment plans.
The investment from IFC and AfricInvest is a signal of their confidence in Britam’s future prospects. The company has said it plans to spend the new capital on increased digitisation, development of new products and investment in regional operations.
“Britam’s regional operations, experienced management team, the entrepreneurial spirit of key shareholders, and the company’s belief in good governance were all elements that attracted us to Britam. These are the ingredients that we typically look for as Investors,” AfricInvest East Africa senior partner George Odo said in an earlier statement.
This is AfricInvest’s second major investment in a local insurer after UAP Holdings where it was bought out at a large profit as part of the insurer’s takeover by financial services giant Old Mutual.