Egyptians say in talks with several RVR suitors

Friday January 06 2017

Egyptian investment firm Qalaa Holdings has confirmed that it is talking to several local and international investors as it seeks to sell its stake in Rift Valley Railways.

The Business Daily on Wednesday reported that a consortium of local firms has made a $133 million bid to buy an 80 per cent interest in the Kenya-Uganda railway from the Cairo-based firm.

“Qalaa Holdings… confirms that preliminary discussions are ongoing with several prospective local and international investors for the sale of its stake in Rift Valley Railways (RVR), the national railway of Kenya and Uganda,” the multinational said in a statement on Thursday.

“No official agreement or offer has been reached as of yet, and Qalaa will continue to communicate further information in due course as negotiations advance.”

The company said it holds an indirect stake of 73.76 per cent in RVR which it has classified as a discontinued operation since the first quarter of 2016 ahead of the planned exit.

Its total direct and indirect interest in RVR, including stakes held by several of its partners such as Dutch fund FMO, stands at 85 per cent.  


Qalaa was responding to inquiries from its regulator, the Egyptian Exchange (EGX), in the wake of the Business Daily article.

Armstrong & Duncan, a company chaired by former Nairobi State House operative Stanley Murage, is part of three companies making up the consortium intent on taking over RVR.

The others are petroleum distributor Rubix Energy and logistics firm Shreeji Enterprises, with the local firms also keen on roping in South Africa state-owned railway firm Transnet Engineering to bolster the consortium’s technical and operational credentials.

The consortium is betting on a multi-pronged strategy to turn around loss-making RVR including funnelling existing customers to use the railway operator’s services as well as expectation that some of the crude oil coming from the region’s wells will come through.

Transaction documents show that nearly all the cash generated from the deal is earmarked for reinvestment in RVR, signalling that the railway operator is in such dire straits that Qalaa does not hope to make any profit from it but is content with transferring the risk to another operator.

It remains to be seen whether Qalaa, which has given up on RVR, will accept the offer.

The governments of Kenya and Uganda are also expected to have a say in the proposed transaction with an emphasis on compliance with the terms set out in the concession agreement.

The 15 per cent stake in RVR held by Uganda’s Bomi Holdings is not for sale.

The Stanley Murage consortium has offered an initial $50 million, with capital expenditure and maintenance to take up $17 million, financing legal liabilities ($16 million), plugging operational cash flow deficits ($12 million) and urgent operational continuity ($5.12 million).

Some $40 million has been offered to purchase rolling stock like wagons for use in expanding RVR’s operational capacity to handle more cargo destined for the East African region.

Another $40 million has been set aside for investment in the business over the remaining years of the concession, which runs until 2031.

The consortium noted that RVR has defaulted on some of its loans and some of the lenders are opposed to a restructuring of the debt.

The railway operator has also breached a number of items in the concession agreement, including defaulting on fees payable to the governments of Kenya and Uganda.