The year 2018 was a busy one for several industry transitions, something that saw mergers and acquisitions contribute approximately 66 billion shillings to the Kenyan Economy, as evidenced by the Competition Authority.
In 2015, mergers and acquisitions globally involved more than 4 trillion dollars of assets, and new research suggests these deals have large, negative effects on consumers.
In most cases, mergers and acquisitions usually lead to increased market power for big corporations that in turn hurt customers. For example, prices of goods and or services increase between 15 percent to 50 percent after a merger has taken place with no equivalent increase in the quality of the goods being sold.
Here is a list of top mergers that we expect to take place in 2019:
KenolKobil and Rubis PLC
A cash offer by Rubis Énergie SAS’ to buy all the issued ordinary shares of KenolKobil was approved by the fuel seller’s board in January 2019.
In the deal, Rubis will acquire the remaining 75 percent of KenolKobil since it already owns a 25 percent stake in the listed oil marketer which is about 367,793,124 shares.
Rubis has proposed to pay 23 shillings a share for the remaining 75 percent stake, valuing the company at 35.3 billion shillings.
KenolKobil’s outstanding shares are 1,471,761,200. Together with other shareholders, namely UM Holdings, which controls 40.36 percent stake, and Energy Resource Capital has a 5.9 percent stake, it controls 51.83 percent of KenolKobil.
In a statement that was released in October 2018, Rubis revealed that it would finance the takeover valued at 35.3 billion shillings through the group’s cash and from existing credit facilities.
The acquisition of KenolKobil by Rubis is likely to see it being delisted from Nairobi Securities Exchange.
Telkom and Airtel
Telkom Kenya Limited and Airtel Networks Kenya Limited announced the signing of a binding agreement that will see shareholders of the two businesses enter into an agreement that will merge their operations to form a joint venture company. The joint company is said to be named Airtel-Telkom.
The merged company will be chaired by Telkom Kenya Limited CEO, Mr. Mugo Kibati while Airtel Networks Kenya Chief Executive, Mr. Prasanta Sarma, will be appointed Chief Executive Officer.
The arrangement will combine the two companies’ respective Mobile, Enterprise and Carrier Services businesses in Kenya. However, Telkom Kenya Limited’s real estate portfolio and specific government services will not form part of the combined entity.
The completion of the transactions and agreement are subject to approval by the relevant authorities.
NIC Bank and CBA
According to a statement by NIC chairman on 31st January 2019, NIC will merge with the country’s biggest privately-owned bank, Commercial Bank of Africa (CBA), to create the third-biggest bank in the region.
For the arrangements to be concluded, NIC aims to get shareholder approval in the first quarter of 2019, regulatory approval in the second quarter, and formally merge in the third quarter.
The transaction is said to take place through a share exchange between the two banks, with current NIC group shareholders owning 47 percent of the merged entity and CBA shareholders owning 53 percent of the merged entity.
NIC Group will remain listed at the Nairobi Securities Exchange despite the merger.
Brookside and Fresha (Unconfirmed)
Brookside Dairy, producers of Ilara, Tuzo and Delamare brands of milk, are said to have approached Githunguri Dairy Farmers Cooperative to acquire its Fresha product line.
Brookside has a market share of 40 percent, followed by New KCC which has a 35 percent market share while Githunguri Dairy Farmers Cooperative holds a 10 percent share.
The acquisition, if successful and approved will see Brookside take over half of the market share.
Brookside, which is associated with President Uhuru Kenyatta, has so far acquired Delamere in 2017, Freshy Dairy and Daima in 2015, Molo Milk in 2013 and Tuzo, Lea and Ever Fresh in 2010.