The proposed BOC Kenya takeover by Carbacid and Aksaya Investments has been put on hold pending the hearing of an appeal lodged by a shareholder at the Capital Markets Tribunal. Former BOC Kenya chairman Ngugi Kiuna, who holds a 7.6% stake in the company, filed an appeal at the Capital Markets Tribunal on 2nd March against the BOC Kenya takeover, saying it undervalues the listed company.
With 7.6% stake, Mr Kiuna is among the top three shareholders of BOC. He was a long-time director of BOC whose board he joined in 1993 as a non-executive director. He was appointed chairman of the firm in 2012 and progressively increased his shares in the company. Mr Kiuna argues that CMA ignored the undervaluation of BOC besides disregarding the protection of interests of minority shareholders.
He urges that, “that the approval granted by the first respondent in respect of the proposed takeover offer by Carbacid Investments Plc and Aksaya Investments LLP to acquire up to 100% of the issued ordinary shares of BOC Kenya Plc be set aside in its totality for being invalid, null and void ab initio,” Mr Kiuna says in the appeal.
The buyout deal was planned to close on 6th April 6, 2021, but will now have to wait for the petition to be heard and determined. According to Mr Kiuna’s valuation, as of 31st December, 2020, BOC Kenya had Ksh1.1 billion in cash and cash equivalents alone.
In a cautionary announcement BOC Kenya, the medical and industrial gas manufacturer, asked its shareholders to stop sending in forms committing to sell their shares to Carbacid Investments which has offered to acquire the company at Ksh63.5 per share or a total of Ksh1.2 billion.
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“Pending further guidance from the CMA and/or tribunal, we wish to inform you that no further action should be taken in relation to the activities set out in the transaction timetable provided in the takeover offer document forwarded to you on February 19, 2021,” BOC said in a notice published on 23rd March. “This includes the filling and return of acceptance forms. Shareholders who have submitted their acceptance forms to date need not take action until further guidance is provided.”
Section 35A (17) of the Capital Markets Act (CAP 485A Laws of Kenya) provides that upon any appeal to the Capital Markets Tribunal, the status quo of any other matter or activity related to the appeal shall remain until the appeal is determined.
Carbacid is guaranteed of 63.5% stake pledged by majority shareholder, BOC Holdings.
Mr Kiuna argues that BOC has not revalued its freehold land and buildings at market rate, maintaining that the Ksh46.4 million valuation is a gross undervaluation. “The information presented in the [BOC] financial statements is incorrect, not up to date and misleading, with some entries having been exaggerated and others understated,” he said.
According to independent valuation firm Dyer and Blair Investment Bank, BOC share was worth Ksh91.76, bringing the total value of its 14.8 million shares to Ksh1.7 billion. However, Carbacid’s total bid price is Ksh1.2 billion, Ksh552 million less than Dyer and Blair Investment Bank valuation.
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BOC Holdings, the majority shareholder in BOC Kenya, had already agreed to sell its 65.38 percent stake to Carbacid at the Ksh63.5 per share offer price. Mr Kiuna has business interests and shares in Maiden Lane Investments Limited, Proctor & Allan (EA) Limited and land holdings in Tatu City.
The appeal is set to delay the takeover process, with the offer to BOC’s shareholders having initially been scheduled to run until 6th April. Carbacid is, however, guaranteed of securing a 63.5% stake pledged by the target company’s majority shareholder BOC Holdings.
