Billionaire investor Chris Kirubi is set to buy an additional 20 percent stake in Centum Investment Company in a deal worth Ksh2.7 billion ($27 million) at a time the investment firm’s stock has hit a seven- year low.
This will mark the second major share purchase by Mr Kirubi, 79, who says that the company’s prevailing share price on the Nairobi Securities Exchange (NSE) continues to undervalue its true worth.
The businessman spent more than Ksh1 billion ($10 million) between September 2013 and August 2015 to raise his stake in the company from the previous 24.99 percent to the current 30 percent.
He will seek to buy 133 million shares of Centum Investment, marking his first major deal in recent years as he continues to recover from a serious illness.
The announcement of the new share purchases comes after Centum’s stock dropped to a nearly seven-year low of Ksh20.25 ($0.02) on Monday. This marks a 35 percent decline over the past 12 months alone.
The stock price is also a 72 percent discount compared to the company’s net asset value per share of Ksh75.5 ($0.75), according to its financial results for the six months ended September 2019.
Mr Kirubi has said that he believes Centum shares should be valued north of Ksh100 ($1) apiece.
“The public is hereby notified that … Capital Markets Authority has granted Christopher Kirubi an exemption from making a mandatory take-over offer in the event that the shareholder makes any acquisition of up to 49.99 percent of the ordinary shares of Centum,” Mr Kirubi said in a press notice.
This means that he only wants to raise his stake but does not intend to make an offer to take full ownership of the company.
The regulator requires investors who own more than a quarter of a Nairobi Securities Exchange-listed firm to state whether they intend to take full control when buying stocks equivalent to at least five per cent in it.
Mr Kirubi said he was allowed to buy the additional shares because his objectives are aligned with the regulator’s principles.
He said his moves will result in significant demand for Centum’s shares and aid in price discovery, allow other investors to exit and enable him to raise his stake in the company.
“The shareholder has been the holder of ordinary shares in the company for over 20 years and has, over time, acquired up to 30 percent of the ordinary shares of the company, as had been earlier permitted by the CMA,” the notice said.
Mr Kirubi is among the top investors who have nursed major paper losses over the past few years, with the recent market sell-off linked to the spread of the coronavirus further hitting their wealth.
His holding in the investment firm was valued at highs of Ksh12 billion ($112 million) in 2015–the year when the last bull market ended. His stake is currently valued at just Ksh4 billion ($40 million), a paper loss of Ksh8 billion ($80 million) or 66 percent.
Centum’s chief executive, James Mworia, also spent more than Ksh200 million ($2 million) from 2015 to acquire 5.6 million shares of the company that are now valued at Ksh114 million ($1.14 million).
Scores of other Centum employees, including senior managers, also bought stock in the company and are similarly underwater. The share price rout has continued despite the company reversing its previous policy of freezing dividends in favour of reinvesting all its earnings.
Centum now pays dividends of Ksh1.2 per share.
Before Mr Kirubi’s new announcement, the investment firm had planned to use a mix of higher dividend payouts and share buybacks to force its share price upwards.
The company said in its latest available annual report that it would spend up to Ksh19 billion ($190 million) to pay dividends and repurchase shares over the medium term.
“In line with the objective of closing the price to net asset value (NAV) gap and following significant investor engagement, we are of the view that an enhanced dividend payout and a share buyback will bring the share price in line with the NAV per share,” Mr Mworia wrote in the report.
While the Companies Act allows companies to buy back their shares, additional regulations are still awaited from the CMA to effect such transactions.
Buying more shares in Centum will further concentrate Mr Kirubi’s wealth in Centum.
The businessman has over the years liquidated his interests in other publicly traded companies, including KCB and Safaricom , in favour of raising his stake in the investment firm.
He also owns stakes in various private firms, including Haco Industries and Bayer East Africa.
Mr Kirubi’s move to raise his ownership in Centum comes as the company is in the middle of its strategy of investing in large-scale projects in various sectors including real estate.