Agricultural firm Kakuzi Ltd has completed the sale of Siret Tea Company to EPK Outgrowers, a company associated with directors of the listed company. Photo/FILE
What you need to know:
The transaction, valued at Sh385 million, was to be implemented over a seven-year period ending in December 2013.
Under the framework, EPK bought a 14 per cent stake for Sh53.9 million in 2007, 10 per cent in 2008 for Sh38.5 million, 17 per cent in 2009 for Sh72.9 million, and an 8.5 per cent stake in 2010 for Sh38.1 million.
The conclusion of the sale will see the size of land with tea operations under the control of Kakuzi fall from last year’s 962 hectares to 510. Tea business contributed Sh287 million to the company’s Sh644 million profit after tax last year.
Agricultural firm Kakuzi Ltd has completed the sale of Siret Tea Company to EPK Outgrowers, a company associated with directors of the listed company.
The sale of the remaining 50.5 per cent stake of the tea estate held by Kakuzi is the culmination of a phased transaction that started in 2007.
The sale was met with stiff resistance from minority shareholders who claimed that Kakuzi directors who brokered the sale agreement had an interest in the buyer, EPK Outgrowers.
Kakuzi chairman William Tarplee and MD Graham Mclean were listed as founding directors of EPK Outgrowers. The resulting stalemate ended when President Kibaki issued an exemption that allowed the majority shareholders to sell the vast tea estate and factory.
“In accordance with the framework agreement entered into with EPK Outgrowers Empowerment Project Company Ltd (now known as Siret Outgrowers Empowerment and Produce Company Ltd (SOEP) in 2007, SOEP has given notice that it will exercise the option to purchase the remaining 50.5 per cent shareholding in Siret Tea Company,” said Mr Tarplee in a statement released on Tuesday.
Kakuzi is majority owned by Camellia Plc of England through Bordure Ltd, and Lintak Investments, who hold a combined majority of 50.7 per cent of issued shares.
The transaction, valued at Sh385 million, was to be implemented over a seven-year period ending in December 2013.
Under the framework, EPK bought a 14 per cent stake for Sh53.9 million in 2007, 10 per cent in 2008 for Sh38.5 million, 17 per cent in 2009 for Sh72.9 million, and an 8.5 per cent stake in 2010 for Sh38.1 million.
The acreage of the initial Siret Tea Estate, situated in Nandi District, was 981.9 hectares.
The Nairobi Securities Exchange listed firm warned its shareholders that the transaction might have material effect on the value of its shares. “In the short term it will get a cash flow which may boost share valuation, but in the long run it will depend on its profitability,” said Johnson Nderi, a research analyst with Suntra Investment Bank.
Kakuzi’s finance director Ketan Shah on Tuesday declined to comment on the transaction’s implications on the company’s finances.
From the sale of its 49.5 per cent stake in Siret Tea, Kakuzi has booked a profit of Sh75.5 million. Settlement of the transaction, expected to be complete by end of this month, will see Kakuzi book a one-off gain this year while exposing it to a drop in revenues in future.
Investors may be attracted to the share by prospects of a special dividend payout arising from the cash inflow of the sale.
“We estimate a 13 per cent reduction of acreage controlled by Kakuzi as a result of the transaction and a 20 per cent reduction impact on profits,” said Standard Investment Bank.
The conclusion of the sale will see the size of land with tea operations under the control of Kakuzi fall from last year’s 962 hectares to 510. Tea business contributed Sh287 million to the company’s Sh644 million profit after tax last year.
The company has been developing its operations in Makuyu near Thika, which include the cultivation of avocados, pineapples in partnership with Del Monte Kenya, macadamia, and rearing of cattle.
