You might not have heard of it yet, but there is an unofficial SPAC in Kenya, at least for us, in as much as most analysts do not see it that way.
Earlier in the year, we wrote about the Nairobi Business Ventures topping the charts as Kenya’s top earner in terms of share price activity on the Nairobi securities exchange.
From a loss-making entity, trading at levels of below
Look, the primary business of Nairobi Business Venture (NBV) Limited has primarily been the sale of imported leather shoes and leather accessories which were rebranded und the name KShoes (previously ‘Kwanza’ shoes).
The shoes and accessories were imported from China and India and rebranded for the Kenyan domestic market. So, how did a company pick in from trading from the lows of Kes 0.61 to Kes 12.40 per share and now trading with uneasy settle at between Kes 5.00 and Kes 6.50 per share?
Hold up
But first, what is a Special Purpose Acquisition Company (SPAC) or as they popularly know “blank-cheque” companies?
Well, SPACs are companies that set out to absorb/acquire other companies, listed and unlisted with the end aim of getting to do more capital raising through an Initial Public Offer (IPO). After the IPO, the company goes ahead and does more and more acquisitions, finally creating its own portfolio of companies or a conglomerate.
The risk with SPACs is that investors do not get an opportunity to scrutinize the books of the SPAC (Acquiring company) and the fact that most retail investors get to access the stock at a premium compared to the SPAC investors.
Is NBV a Special Case of SPAC?
Well, NBV had declared their interest to do a “restructuring” which the then loss-making company had hoped would route it back to profitability. Delta International FZE, a Dubai-Based company showed interest, and NBV fell for their offer.
Delta’s main aim to inject liquidity in the company was to acquire an 84 per cent stake in NBV, this would automatically give the company a majority control and would finally acquire a listing status, in the final end, they would shift the company to cement production, away from the Shoe company.
On November 16, 2020, Nairobi Securities Exchange suspended the company from trading, a move which was to allow for the completion of the company’s restructuring exercise which included a share split, allotment and issuance of shares to Delta International FZE and subscription agreement between NBV and Delta.
For NBV, despite the heavy investment made, and the now over 84% acquisition in NBV, shareholders will never get to scrutinize the financials of Delta International FZE. This is despite the many investments the company is making, including the company having direct influence at the Board & management levels and claiming to be looking out for “shareholders.”
Delta’s Swing Pushing the Shoe Re-seller.
Well, since Delta came in and took the majority stake in NBV, the company has turned into a behemoth of activities for shareholders in the NSE listed company. In a span of 9 months since the resumption of trading of shares of NBV at a price of Kes 5.00 per share, the company has identified three major businesses it would want to diversify it’s portfolio to:
- •Cement Manufacturing – NBV’s core business from the company and priority, from the company’s profile is to set up a Cement Manufacturing facility with a capacity of 1.25 Metric Tonnes (MTs) per annum in Kenya with the latest state-of-the-art technology.This is yet to be done as NBV still remains in the process of acquiring suitable land in Nairobi and Mombasa for the proposed manufacturing plants.
- •Aviation – Imagine flying in a plane repaired by a former shoe reseller! NBV’s new management us moving the company into the aviation industry, who would have fathom this?NBV is seeking to acquire Aviation Management Solutions Ltd (AMS) and Air-Direct Connect Ltd (AirDC). AMS owns the only privately-owned hangar at Jomo Kenyatta International airport. AirDC is the licensee with the necessary skilled professionals to provide “third party” maintenance for scheduled (Line, Base, Shops, Specialist Tasks, Heavy Checks) and unscheduled support services for those aircraft types that are commonly utilized in the region and operates vide the AMS facility.
- •Automobile – NBV began the in the process of acquiring 100% shareholding of Delta Automobiles limited which is a heavy truck repair and maintenance facility in Kenya.
Numbers in Share Price
- •986% – How much NBV has rallied year on year.
- •+47.2% – How much NBV has rallied since the year began.
- •-8.7% – NBV share price loss in the past one month.
- •4th – The rank NBV currently holds in terms of investor returns on the Nairobi Securities Exchange.
Your take?
Well, we can argue that the transaction was a reverse merger; where a private company (Delta) purchased a shell company that has no current operations and few assets but is publicly traded. (This was the major case for NBV).
So, as a current or prospective shareholder in NBV, here’s an important question you should ask yourself, are you still buying the shoe company or are you indirectly a shareholder of Delta International FZE? Your guess is as good as mine.
Call it reverse listing, but Delta International FZE is our first “unofficial” SPAC in Kenya. Wait, did you think it was NBV?
The Future
The Nairobi Securities Exchange has companies that are SPAC ready, companies like Uchumi Supermarkets that are technically shell corporations at this time can have SPACs takeover. Delisting or SPAC uptake, what do we have?
Disclaimer: This is not an investment recommendation, investors and the general public are advised to do their own research before investing in any security.
