Capital Markets

Rea Vipingo battle hots up with entry of third bidder

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Rea Vipingo's competing offers.

The battle for control of listed agricultural company Rea Vipingo intensified on Wednesday after a third group of investors offered to buy it at double the market price.

Www.Bid Investment Company said it was ready to buy Rea Vipingo for Sh3.3 billion, topping two rival bids, including one from Rea Vipingo’s principal shareholder, Rea Trading.

Bid Investment said it was offering the company’s owners Sh55 per share, a 96 per cent premium on Rea Vipingo’s closing share price when trading in the stock was suspended last month.

Rea Trading’s offer had been followed by a Sh50 per share offer from another shareholder in the company, Centum Investment, whose bid was Sh10 more than Rea Trading’s offer of Sh40 a share.

Centum on Wednesday responded cautiously to the new bid, stating that it was studying the situation with a view to making a decision.

“This is an interesting development. We shall make a decision at the appropriate time,” said James Mworia, the Centum Investment chief executive.

Www.Bid describes itself as a private company incorporated in Kenya in 2001 and an informed source said it is owned by a group of Kenyan insurance brokers.

READ: British duo to sweeten Rea Vipingo offer

Bloomberg News, however, reported that one Dilesh Bid, who is also the chief executive of locally owned BTB Insurance Brokers, had admitted to owning Www.Bid Investment Company.

Mr Bid also claimed that he owned Kenyalogy.com, which already owns 836,900 shares in Rea Vipingo.

“We are looking at redeveloping our business and I see a lot of potential in Rea Vipingo,” Mr Bid said, disclosing he hoped to use cash for the acquisition.

This is the first open takeover bidding war in the 50-year history of the Nairobi Securities Exchange (NSE) and many analysts see the gross undervaluation of Rea Vipingo at Sh27.50 as the main driver.

“The pricing of the share appears to be at a discount and this is definitely related to the amount of assets Rea Vipingo has, which the bidders believe to be of high value,” said Vimal Parmar, the head of research at Burbidge Capital.

Rea Vipingo owns nearly 70,000 acres of land. In Dwa Kibwezi it has 22,205 acres, Vipingo Kilifi (10,570 acres) and 36,645 acres in Tanzania. It is the largest sisal fibre producer in Africa with a small interest in horticulture and a spinning factory that converts sisal fibre into yarns and twines.

The company is estimated to have about 3,000 employees, most of who live on its farms.

London-based brothers Richard and Jeremy Robinow own Rea Trading and are members of a family that has owned assets in Kenya since the 1950s.

The brothers own 57.04 per cent of Rea Vipingo through Rea Holdings Plc, which has a 36.47 per cent stake and Rea Trading with a 20.57 per cent stake.

Takeover rules agreed with the regulator demand that at least 90 per cent of minority shareholders must accept the offer for it to succeed.

The deal must also be supported by 75 per cent of all shareholders to delist from the NSE as sought by the Robinow brothers.

Centum said it was targeting control of 25 per cent of Rea Vipingo to consider the bid successful. The investment firm has no plans to delist Vipingo from the NSE.

READ: Centum’s counter-offer sparks bidding war on Rea Vipingo

Analysts said Centum’s lower threshold for success may encourage it to place a higher bid to beat the latest rival. Mr Mworia declined to comment on that proposal.

The entry of a third bidder means rivals must increase their offers to remain in contention. “The Robinows cannot remain at Sh40 a share and stay in the race,” said Mr Parmar.

The first two bidders have to inform the regulator of any intention to revise their offers before making it public. Legal experts said the bidding could continue as long as it was within the time lines the bidders have set for themselves.

“There is no deadline as to when the bidding can stop. Various companies or people can continue or even revise their bids. This is like an auction,” said James Kamau, a partner at Iseme, Kamau and Maema Advocates.

The latest bids have forced the brothers to go on a charm offensive, stating that they intend to continue with the same business and retain the 3000 people employed in the sisal estates.

Early this week, Rea Trading said it was not seeking to take over the company in order to divest from large-scale sisal growing.

Richard Robinow, who chairs Rea Trading,  said that to protect the sisal business and the jobs it offers in Kenya and Tanzania, Rea Vipingo needed to expand its existing business into new areas such as utilisation of bio-mass and bio-gas.

Many analysts have long speculated that Rea Vipingo is undervalued taking into account the huge tracts of land it owns in the Kenyan coast.

Plantation land along the Kenyan coast alone is estimated to be worth more than Sh1 million an acre given its proximity to a golf estate.

Such a price would mean that the 10,570 acres of land that the company owns in Kilifi could be worth at least Sh10.6 billion.