Business boom sparks acquisition frenzy in Kenya

An improving business climate in Kenya has seen both listed and unlisted companies seek nod of the competition authority to acquire other firms locally.

Already, the watchdog has approved plans for six entities to undertake acquisitions in Kenya, signalling the firms’ prospects to increase their market share in the market.

In a Gazette notice published last Friday, the authority gave Dubai-based vehicle giant, Al-Futtaim, the go ahead to buy troubled motor dealer, CMC Motors. It also gave other entities the approval to undertake acquisitions, these include Centum and Arte-Caffe to buy Genesis Investment Management and seven Dormans coffee shops respectively.

The authority also gave global media firm, Cavendish Square Holding approval to acquire 16.484 per cent additional shares in ScanGroup.

A Sh1.8 billion deal to increase the stake of global communications firm, WPP, in Scangroup, a media services investment was completed in December 2013.

The transaction, executed through Cavendish Square Holding, a wholly owned unit of WPP, raised WPP’s shareholding in Scangroup to 50.1 per cent from 33.616 per cent.

“Some of the acquisitions are of strategic nature while others are meant to increase the market share of the firms in question. For others, especially the unlisted, it’s more of consolidation of their businesses amid increasing competition,” said Mika Davis, analyst at Contrarian Investing.

Also given the nod is Johannesburg-Exchange-listed consumer firm, Tiger Brands to acquire 100 per cent stake in both Rafiki Mills and Magic Oven Bakery.

The deal consolidates Tiger Brands flour milling and bakery business in Kenya. Tiger Brands is a giant fast moving consumer goods maker in sub-Sahara Africa.

The acquisition of CMC by Al-Futtaim comes on the back of the latter’s plans to join the second-hand motor vehicle business in Kenya, where its sees a big opportunity. Al-Futtaim hopes that all of CMC’s shareholders will agree to sell their stake by mid this month paving the way for it to expand its motor vehicle empire in Kenya and East Africa, too.

Last year, the Dubai-based family owned firm made a Sh7.5 billion cash offer for purchase of 100 per cent of issued shares in CMC Motors. Already, 50.6 per cent of CMC’s shareholders have approved the acquisition.

Al-Futtaim had indicated that many shareholders had agreed to sell their stake in the motor dealer that is still serving suspension from the Nairobi Securities Exchange.

Its suspension followed eruption of boardroom wrangles in 2011, which have since cost it a lucrative franchise — Land Rover Defender, Jaguar and Range Rover brands — to rival RMA Group. On successful completion of the takeover, CMC Holdings will de-list from the Nairobi bourse.

Meanwhile, the approval for acquisition of seven Dormans coffee shops by Arte-Caffe will see the latter’s outlets rise to 11. The deal happens almost two years since a 90 per cent acquisition of Nairobi Java House by Emerging Capital Partners, a US-based private equity company.

Investment firm, Centum, will also acquire a 73.35 per cent stake in Genesis, an investment management services entity that manages over Sh100 billion worth of funds.

Five other companies have been given an exemption from the authority’s regulatory requirement as the “proposed acquisition will not affect competition negatively,” the Competition Authority of Kenya said.

Last year saw a lot of acquisitions and mergers in Kenya with AccessKenya exiting the stock market. This has affirmed the country’s significance as a lucrative investment destination especially with the discovery of oil and gas.