CMA cautions investors against Cembe Millers offer
Capital Markets Authority acting CEO Paul Muthaura. CMA has asked Cembe Millers public offer promoters to withdraw it. PHOTO | FILE
What you need to know:
Little-known Cembe Millers is asking investors to put in a minimum of Sh650,000 in the new venture that promises an annual gross margin or operating profit of Sh570 million.
The CMA, however, termed the offer prominently advertised in the daily papers on Thursday unlawful as it had not received the regulator’s approval.
The offer which opened on Thursday is supposed to end in May.
The Capital Markets Authority (CMA) has warned investors against buying shares in Cembe Millers after the little-known company announced an unauthorised public offer on Thursday.
The miller is asking investors to put in a minimum of Sh650,000 in the new venture promising a annual gross margin of Sh570 million.
The CMA, however, termed the offer prominently advertised in the daily papers on Thursday unlawful as it had not received the regulator’s approval.
“The CMA has written to the promoters of the Cembe Millers offer requiring them to immediately withdraw it,” said CMA in a statement sent to Business Daily.
The authority further said it was starting investigations together with the police to establish the identity of the persons behind the offer.
The offer which opened on Thursday is supposed to end in May.
Cembe said the capital raised will be used to fund setting up a factory, asset acquisition and to meet initial operational costs for the new venture.
The company’s website does not have any details of the ownership nor specific physical location. It has a postal address of Muthaiga.
The website shows Cembe was founded in 2013 and is headquartered in Nairobi with plans to set up flour mills in Eldoret, Nakuru and Mombasa.
The company claims to have a fleet of vehicles to distribute its products in Kenya and other East African countries.
Cereal Millers Association disowned the company. “We have never heard of them,” said the association’s chief executive officer Paloma Fernandez.
Retailers also did not know of the company nor any of its products.
Cembe said it targets a daily output of 1,000 bags of maize which will cost it an estimated Sh2.6 million.
It estimates to sell the same number of bags daily which will earn it Sh4.5 million, leaving it with a gross margin of Sh1.9 million daily and more than half a billion yearly.
“The investment maturity date is two years and net profits will be awarded to partners proportionately based on their shareholding with the company,” said the Cembe Millers.
CMA pegged its decision to declare the offer unlawful on Section 30(A)(4) of the Capital Markets Act which states, “an issuer or an offeror shall not make a public offer of securities unless that issuer or offeror has submitted a prospectus in respect of that offer to the Authority for approval’’.
Share sales and other capital raising offers in Kenya are regulated by the CMA.
A company selling shares or bonds to the public is required to furnish the public with enough information to guide their investment decision through an information memorandum that discloses assets and financial performance history of the firm.
This is the second time that CMA is stamping its authority by halting a share sale.
Cembe Millers had the option of raising the funds privately which would not have attracted the regulators. Venture capitalism is yet to pick up in Kenya making it hard for start-ups to raise capital for their businesses.
As per its estimates, Cembe Millers, expects to have annual revenues of Sh1.3 billion which market sources said was modest. Listed miller, Unga Group, recorded revenues of Sh17 billion last year.
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