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Capital Markets

Queries over Kenol sale as CMA clears insider trade shares

A Kenol-Kobil petrol station in Nairobi. FILE PHOTO | NMG
A Kenol-Kobil petrol station in Nairobi. FILE PHOTO | NMG 

KenolKobil shares that were at the centre of an insider trading investigation ahead of the firm’s takeover bid by French firm Rubis Energie have been cleared for sale.

The move has raised queries over the regulator’s handling of the transaction.

In a Friday notice, Rubis said that it had received sell commitments from shareholders holding 96.85 percent of the remaining 1.183 billion shares it does not already own, making the offer a success.

This now paves the way for the oil marketer’s delisting from the Nairobi Securities Exchange (NSE).

The Capital Markets Authority (CMA) had in October flagged as suspicious purchases of 56.8 million KenolKobil shares at a cost of Sh850.5 million by five individuals through stocks agent Aly-Khan Satchu in the days leading up to the announcement of Rubis’ offer.

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This positioned them to book a 53.6 percent gain amounting to Sh455.9 million, based on the buyout price of Sh23 per share.

Court filings by the CMA have so far revealed that the regulator has retrieved evidence of mobile phone communication between Mr Satchu and buyers of the shares under investigation.

Frozen

Given that the balance that has not been committed for sale is only 37.7 million shares, questions have now arisen over how the CMA is handling these 56.8 million shares whose owners’ trading accounts were frozen pending conclusion of investigations into suspected insider trading.

Rubis’ announcement on Friday means that some or all of the shares under investigation have been offered to the French firm for sale.

Shareholders who did not consent to the buyout are set to be acquired compulsorily as per CMA takeover rules, before the company is delisted from the NSE.

The CMA as well as transaction advisors SBG Securities had not responded to queries on the matter by the time of filing this story.

Rubis also declined to comment on the issue, instead referring all queries back to the regulator.

“Please refer to the notice that was published in the newspaper on Friday for further details of the offer results and acceptances…regarding the other queries raised in your email, please refer them to the CMA,” Rubis chief finance officer Bruno Krief told the Business Daily.

Insider trading

Shares that have been frozen are not tradeable, meaning that Rubis may have to hold off paying for the shares pending determination of the insider trading investigations.

The volume of contentious stock (3.7 percent of KenolKobil’s issued shares) is however not large enough to derail Rubis from achieving the 75 percent in acceptances it needs to conclude the buyout.

The successful disposal of the shares by the five buyers would, however, leave the CMA with little recourse beyond imposition of a fine should it successfully argue its insider trading case against Mr Satchu.

The CMA Act imposes a fine of not more than Sh2.5 million or a jail term not exceeding two years for first time offenders in the offence of insider trading.

It also allows the regulator to compel the offender to make a payment equal to the size of the gain made or loss avoided as a result of the deal.

The CMA is yet to disclose whether the buyers introduced by Mr Satchu are party to the investigations.

ABC Capital corporate finance manager Johnson Nderi said that the buyers could as well fall back on this, arguing that they are free to do with their shares as they deem fit.

Escrow account

“CMA’s remedy might be to get a court order, which would allow the holding of the proceeds in an escrow account pending the determination of this matter,” said Mr Nderi.

In the meantime, Rubis is moving on with the acquisition plans.

The firm has successfully obtained an indefinite extension of the suspension of KenolKobil shares from trading at the NSE following the completion of reconciliation and announcement of results of the offer.

“The suspension of trading will facilitate the anticipated acquisition,” said the NSE in a notice Monday.

Rubis said in their notice on Friday that they wanted the suspension to remain in place until they complete the acquisition of the remaining 37.2 million shares.

The firm will pay Sh26.35 billion for the shares for which it has already received a sale acceptance, and an additional Sh855.8 million once it moves to make the compulsory acquisition of the remaining uncommitted shares.

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