A section of Rea Vipingo’s sisal estate located in Kilifi. The firm’s nearly 6,000 owners could pay over Sh142.5 million in capital gains tax. PHOTO | FILE
What you need to know:
Rea Vipingo’s stockholders could pay over Sh142.5 million in capital gains tax, based on the margins set to be made from the two offers of Sh70 per share by the Robinow brothers and Sh75 a piece by Centum.
The stock last traded at Sh27.50 on the Nairobi bourse before it was suspended in November last year.
Rea Vipingo has a total of 60 million issued shares.
Rea Vipingo shareholders risk shouldering the newly introduced capital gains tax (CGT) following multiple hiccups that have now pushed the takeover to next year at the earliest.
A case before the regulatory tribunal can only take off end of next month after it was postponed last week.
The sisal firm’s nearly 6,000 owners could pay over Sh142.5 million in capital gains tax, based on the margins set to be made from the two offers of Sh70 per share by the Robinow brothers and Sh75 a piece by Centum.
The CGT, applied at the rate of five per cent, is based on profit booked. The Rea Vipingo stock last traded at Sh27.50 on the Nairobi bourse before it was suspended in November last year.
“Unfortunately, due to the delays in completing the takeover, it will be subject to the capital gains tax,” said Fred Murimi, Centum corporate affairs director.
“There is uncertainty as to the application of capital gains tax as there are regulations that are yet to be gazetted,” he said, referring to confusion over the base value or period the taxman will base calculations on.
The pain of paying the CGT comes as a big blow to Rea Vipingo owners who have waited for more than a year as rival bidders engage in a protracted bidding war for the control of the sisal estate.
Centum has petitioned the Capital Markets Tribunal to throw out the bid by the Robinows’ — of Sh70 per share and a bonus of up to Sh15 per share if they dispose of a portion of Rea Vipingo land — saying the bid violates Kenya takeover rules.
“CMA fundamentally erred in law and in fact in failing to appreciate that a promise for future disposition of the proceeds from the sale of a company’s assets cannot constitute consideration for a takeover offer and is in any event void for uncertainty,” said Centum in its filings to the tribunal.
The case came up for mention last Tuesday but couldn’t proceed due to a quorum hitch after one member failed to turn up.
Another mention is set for January 27, 2015 to confirm whether all parties have filed their affidavits.
The capital gains tax comes as a fresh twist in the intended sale of Rea Vipingo, which has attracted three suitors since the Robinow brothers announced their intention to take over the company last year.
If shareholders accept the Robinows’ offer, they will have booked a gain of Sh42.50 per share based on the last price while the Centum deal translates to a profit of Sh47.50 per stock.
Dividend
This translates to capital gains tax payable at Sh2.125 (Sh135 million CGT) and Sh2.375 per share (Sh142 million) respectively, which could rise as most shareholders bought it at prices lower than the closing one.
Rea Vipingo has a total of 60 million issued shares. It did not pay dividend for the year ended September 2013, adding to the woes of shareholders whose wealth has been rendered illiquid.
Rea Vipingo paid a dividend of Sh1.10 per share in 2012. Intense competition for Vipingo appears to be hinged on the speculative value of the company’s vast land — nearly 70,000 acres in Kenya and Tanzania — which independent analysts have valued at about Sh10 billion.
Rea Vipingo says land under leasehold as at September 2013 was valued at Sh208.03 million but did not declare the market value of its freehold land.
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Note: The results are not exact but very close to the actual.
