The High Court has unlocked ScanGroup’s #ticker:SCAN sale of Sh5.35 billion ($50 million) stake in a data and research firm after a judge allowed the firm to hold an online shareholder meeting to approve the deal.
The deal was on the brink of collapse because ScanGroup had been unable to hold a shareholder meeting ahead of the May 30 deadline to close the transaction due to the ban on mass gathering in the wake of the Covid-19 pandemic.
The court last week approved a deal between ScanGroup and the Capital Markets Authority (CMA) allowing listed firms to hold virtual shareholder meetings and online voting on corporate actions that require owners’ approval.
ScanGroup will now hold a virtual extra-ordinary general meeting (EGM) on May 27 to approve the Kantar deal, which will see the firm offer its shareholders Sh4.60 per share as special dividends from the Sh2.6 billion profit on the transaction.
It had targeted to announce the dividend when unveiling its 2019 financial report, but the shareholder meeting hitch forced it defer the payout.
The CMA had frozen shareholder meetings in line with the government’s directive that prohibits mass gatherings like meetings, weddings and funerals to contain the spread of the coronavirus.
The regulator also advised firms to hold virtual meetings, in effect freezing deals that required shareholder approval in companies whose articles of association do not provide for online AGMs like ScanGroup.
“Shareholders of ScanGroup stand to lose the benefit of the proposed disposal whose value is over Sh5 billion,” said Terry Mwango, a lawyer at Bowmans Kenya, in her petition to the High Court.
“There will be no prejudice to the shareholders of ScanGroup if the EGM is held virtually as demonstrated in the petition.” Justice David Majanja last week allowed companies to hold virtual shareholder meetings during the coronavirus period despite their internal rules not expressly providing for online voting.
The order cushions listed firms like ScanGroup from court action should a shareholder or interested party challenge decisions reached through virtual meetings.
The company, which last week announced a 20 percent drop in net profit for the year ended December 2019, had earlier projected to sell its 60 percent stake in Kantar by March 2020. Scangroup’s London-based parent company WPP, which initiated the transaction, has already completed the sale of its 60 percent equity in Kantar ahead of schedule.
Scangroup will receive about Sh5 billion in the transaction and will use Sh2 billion or 40 percent of the proceeds to pay a special dividend. This will amount to a payout of about Sh4.6 per share.
According to an existing agreement between WPP and Scangroup, the global deal also commits the Nairobi Securities Exchange-listed firm to sell its stakes in Kantar affiliates it owns in Africa.
These include scores of operating units in various African countries housed under investment holding companies Millward Brown and Research and Marketing (which Scangroup acquired just last year).
The company invested Sh1.2 billion to acquire a 100 percent stake in Millward Brown and also incurred a similar expense in cash and stock to take an 80 percent equity in Research and Marketing.