An investor is seeking action against Old Mutual Holdings (formerly UAP Holdings) over allegations of minority shareholders mistreatment among other issues raised to the Capital Markets Authority (CMA) in an ongoing dispute.
- •Joel Kibe, a shareholder who holds 1.55 million shares, wants CMA to investigate the company for mismanagement, asset disposal without accountability, unapproved borrowings, dilution of minority shareholding, and denial of access to company records.
- •He says that actions have rendered the shares of the company illiquid.
- •In 2014, Old Mutual acquired controlling stakes in Faulu Microfinance Bank and progressively acquired a similar stake in UAP Holdings PLC from 2015-2018.
In the letter addressed to Wykcliffe Shamiah, Chief Executive Officer, CMA, and seen by The Kenyan Wall Street, Kibe says he purchased the shares between 2014 and 2015 for Ksh 246,678,352 based on a prospectus issued by UAP Holdings Ltd in 2012.
The ongoing dispute is also playing out in court, where a magistrate barred Old Mutual from trading assets, taking on new debt, or moving funds from the country. Among the issues raised in court include a request to force the company to buy him out at the same price he bought the shares, and at a premium of 18 percent per annum from the date of purchase. The case will be heard in late September.
“We are addressing this matter through the appropriate legal channels and as it is currently before the court, we are unable to provide detailed comments at this time. We are cooperating fully with the legal process and ensuring that our actions reflect our dedication to transparency and fairness,” Old Mutual Holdings said in a statement at the time.
Other areas the dissatisfied investor would like the market regulator to focus on include fraudulent borrowing practices, failure to comply with representation and failure to list on the Nairobi Securities Exchange (NSE).
“In a notice dated 26 January 2015, Old Mutual Holdings announced its intention to acquire effective control of UAP, setting a price of Ksh180 per share. However, subsequent actions by Old Mutual Holdings have been highly prejudicial to minority shareholders, including our client,” says Peter Kingara, the advocate representing the aggrieved investor, Joel Kibe in the letter dated 29th July.
In another notice by UAP Holdings and Old Mutual Holdings issued jointly on 26th June 2015, the companies promised that “…market conditions being favourable and subject to receipt of all required corporate and regulatory approvals, listing of a UAPHL shares on the NSE will be undertaken within eighteen (18) to twenty-six (26) months.”
Managing the Acquisition
He claims that the company has undertaken significant loans and other borrowings without consulting minority shareholders. “The lack of transparency in financial management also breaches sections of companies act which requires the Board to ensure the integrity of the company’s financial reporting.”
Kibe said despite the representation made in the 2012 prospectus, Old Mutual failed to list its shares on the NSE, within the period stated by the Regulations 19 of the Capital Markets (Securities) Regulations of 2002.
The lawyer said this was also in breach of Section 31 of the CMA and the principles of transparency and accountability set in the CMA’s corporate governance code of issuers.
Kibe added that the issuance of preference shares, which diluted the minority shareholders’ stake by nearly 40 percent was conducted without adequate disclosure or consultation. He also brought up the denial of access to company records, and mismanagement and non-payment of dividends which have seen the company not pay dividends for the past seven years.
“In light of the breaches, we respectfully request the Capital Markers Authority to furnish us with copies of the application and other transactional documents submitted to the CMA prior to the approval of the takeover, as per the requirements of Regulation 5 of the Takeover Regulations,” King’ara said.
“The actions have not only rendered the shares illiquid, preventing our client from selling or transacting his holdings, but have also causes significant financial and emotional distress. Despite raising these concerns during the Annual General Meeting and through formal communication with the company, our client has received no substantive response,” King’ara said.
Progress on the merger with UAP Holdings have taken years, amidst reports that some of the company’s liabilities were not disclosed before the transaction closed.