Ugandan millionaire bids for a stake as boardroom control war intensifies

Monday February 15 2010



In a week marked by high drama in the high stakes hostile takeover of the troubled railway concessionaire, Rift Valley Railways, a wealthy Ugandan businessman appears to be winning by stealth.

Charles Mbire, a 51-year old businessman, who is widely known as a pioneer mobile phone operator and now controls 15 per cent of MTN Uganda and the local subsidiary of British money printing firm De La Rue, is bidding to buy 15 per cent of the shareholding reserved for Ugandans in the joint railway concession shared by Kenya and his country.

While Mr Mbire is known to both friend and foe as a respectable, affable man who can regale his business associates with funny stories for hours, he is also known as a smooth operator who has the ear of Uganda’s President Yoweri Museveni.

Perhaps, it is this close association with the political establishment here and his savvy that has over the years made him the go-to-guy by reputable foreign investors entering the Ugandan market with little familiarity with the contours of business and political power in the country.

This has earned him the good-natured moniker, “Mr 15 per cent” with his associates, reflecting the shareholding he owns in some of the leading global brands operating in Uganda in his expansive business empire that some estimate is valued at $65 million.

Mr Mbire’s entry as a shareholder in RVR is a significant gamble, and symbolic move that sheds the light into what the Kenyan and Ugandan governments could be thinking privately about the future of the concession.

It also underscores how fast the tables have turned in the past two months between the power establishment in the two countries, and particularly for the powerful Kenyan investment group Transcentury since Egypt’s Citadel Capital waged war to control RVR.

This was after buying 49 per cent of the 35 per cent stake that lead investor Roy Puffet of Sheltam — the winning consortium — owned in RVR in December, for a reported $10 million.

Mr Puffet was negotiating to sell his stake to Transcentury, which owns 20 per cent of RVR for a similar amount, reputable sources close to the deal told The EastAfrican.

Mr Mbire’s prospects for buying 15 per cent of RVR has not made Transcentury happy, especially because of the fact that it will dilute everyone’s interest in the company at a time when Kenyans are trying to fend off the Egyptian investors.

Mr Mbire, and RVR’s managing director Brown Ondego — both of whom were brought on board by Transcentury in an attempt to clean up the mess at the company — stand out as a major strategic miscalculations in the current fight with the Egyptians.

Somewhere along the way, Transcentury did not manage the relationships well — or misread the motives of Mr Mbire and Mr Ondego — and their presence in the RVR board has worked against Transcentury and Citadel has exploited this fissure to drive a wedge with other shareholders such as Kenya’s businessman Chris Kirubi-controlled Centum Investment (10 per cent), Babcock & Brown of South Africa (10 per cent), Prime Fuels (15 per cent), and Tanzanian businessman Rostam Azziz’s Mirambo Holdings (10 per cent).

All the other shareholders are believed to have either sold or in the process of selling their stakes to Citadel, which would explain why it is pushing to diminish the influence of Transcentury in RVR through aggressive capital calls and bringing in Mr Mbire into the game.

Transcentury has been fighting hard to keep Mr Mbire out. It is known to hold the view that a proper valuation of RVR should be done, and Mr Mbire and other Ugandans invited publicly to bid for the 15 per cent stake at market value.

Citadel is however known to be pushing for a “gentleman” deal that gets Mr Mbire to the table as a shareholder through the backdoor using a sweetheart deal.

While the current jostling is being looked at by many through the prism of Uganda’s nascent oil industry, Mr Mbire believes it is short sighted for anyone to peg their investment in the railway on such suppositions.

“While there is no doubt that Uganda has got oil, rail is just one of many options for getting it out of the country and at this stage nobody knows for sure what mode of transport will be adopted.
“What is not in doubt though is that the East African economy is positioned to grow tremendously in the future and the logistics industry will play a pivotal role in this transformation,” he told The EastAfrican.

Mr Mbire appears to be walking in the footsteps of American Billionaire Warren Buffet who said, “While the railroads won’t take over the world it is something that is part of the future,” after he spent more than $26 billion of his fortune last November on the acquisition of Texas-based Burlington Northern Santa Fe railway network.  

Uganda finally got the opportunity to participate more substantively in the Rift Valley Railways concession after incumbent shareholders approved an application for a 15 per cent stake by the Ugandan businessman and entrepreneur.

“This is a venture I have appetite for and I would be willing to invest if the shareholders agree. I have applied for a stake in RVR but my eventual participation depends on whether the shareholders will approve that application.” 

With the current state of the Kenya-Uganda railway and its shareholder troubles, it takes courage or business savvy for anyone to want the significant risk of putting money in this limping giant.

When the final capital call is made, Mr Mbire’s 15 per cent stake could easily translate into millions of dollars.  

He acknowledges the level of risk involved and says after the business is revived, he will be prepared to spread the risk by selling off some of his stock to other Ugandans.

“In its current state and given the capital requirements, this is not the kind of business that many Ugandans are going to be able to participate in at this moment in time.

“But this is our railway and that is why it was initially called the Uganda Railway.

It is important that we find a way of participating in this,” he said. 

Regardless of whatever scepticism may surround the future of RVR, for those who know the Ugandan homeboy, the deal has precedents.