KenolKobil chief executive David Ohana’s payout from the sale of his ESOP shares to French firm Rubis Energie is now at risk of shrinking by a whopping Sh644.5 million.
This follows the regulator’s insistence that the applicable rules do not allow him to take home the amounts indicated earlier.
KenolKobil said in a notice published Thursday that the company’s employee share ownership plan (Esop) trust deed bars a single executive from taking up more than 25 per cent of shares issued under the scheme.
That rule effectively limits Mr Ohana’s exercisable options to 37.25 million shares out of his total allocation of 88 million.
Rubis had in its October 24 announcement of the takeover deal said it had received commitment from Mr Ohana that he would sell them the entire 88 million shares that were included in the 9.69 percent stake the company considered as irrevocably committed for sale.
Mr Ohana Thursday said that the Capital Markets Authority (CMA) had, after going through the Esop rules, alerted KenolKobil of the limit to his allotment forcing the firm to make the clarification.
“We gave it (the Esop deed) to CMA. They highlighted to us this point…we acted immediately upon receiving the information,” said Mr Ohana Thursdayy.
The revision of entitlement means Mr Ohana can now only exercise his full allotment of 88 million units if the scheme’s trustees amend the rules before the sale goes through.
“It, however, can be corrected by the trustees to increase the limit to allow me get the 88 million shares. I think that is what will happen eventually…but there is procedure of how to do this,” he said.
Rubis, which is listed on France’s Euronext Paris Stock Exchange, has made an offer to buy out KenolKobil shareholders at Sh23 a share in a deal that values the company at Sh35.7 billion.
Rubis on October 23 bought a 24.99 per cent stake in KenolKobil from Wells Petroleum Holdings, a company associated with the late former Cabinet minister Nicholas Biwott’s family.
The total number of KenolKobil shares under the Esop stands at 149 million, according to Thursday’s notice, thus the cap of 37.25 million units for Mr Ohana.
No other KenolKobil executive is known to have been allotted Esop options under the scheme.
A cut in the number of shares means Mr Ohana can now earn only up to Sh856.8 million should he sell all of the 37.25 million shares to Rubis at the offer price of Sh23.
His Esop agreement with the company allows him to take up his options at Sh10.30, putting the cost of purchase at Sh383.7 million.
Sh1.117bn net earnings
Under the previous announcement, Mr Ohana would have purchased all of the 88 million units at a total price of Sh906.4 million and sold to Rubis for a total of Sh2.024 billion leaving him with net earnings of Sh1.117 billion.
Separate sources at the company said they expect the trustees to amend the scheme rules to allow Mr Ohana exercise his full 88 million share option.
Barring this, one source said, the two parties (Mr Ohana and Rubis) are likely to strike a separate deal to cover the lost earnings.
It is not clear whether the rules will be amended before Rubis completes the takeover — which is targeted for early next year— especially in light of the fact that the French firm stands to make significant savings if Mr Ohana is unable to exercise his option fully.
Rubis has stated that it is open to retaining Mr Ohana once the deal goes through, meaning it might be difficult to start off the relationship by cutting his windfall that is seen as reward for turning around the fortunes of the oil marketer in the past five years.
The CMA last month allowed KenolKobil to list 79 million shares into Mr Ohana’s Esop pool, adding to the nine million units that were already issued taking the total to the full 88 million.