Unga Group records Ksh511 million half year-profit amid buyout talks
NAIROBI, MAR 1 — Kenyan-based miller Unga Group’s half year net profit for the six months to December jumped to Ksh511.1 million, on increased revenues from sales.
This is up from Ksh132.8 million recorded in a similar period a year earlier the company has reported, amid ongoing talks for a possible buyout by US multinational—Seaboard Corporation.
The Nairobi Securities Exchange listed miller saw its turnover improve 8.1 per cent to close at Ksh11.07 billion in the period under review.
The firm has pegged the increase in turn-over on its animal nutrition products – pigs, poultry and cattle feed, which recorded a 20 per cent increase in sales due to a stable supply of raw material.
The firms’ human nutrition products which include wheat and maize flour however recorded a four per cent drop in sales, save for its flagship maize flour brand-Jogoo, which partly cushioned the human consumables after recording an increase in its sales.
“The improved availability of grain significantly improved the group’s ability to produce maize meal and animal feeds at better yields, resulting in improved margins. The new supply chain and operational improvement initiatives also contributed to gains in profitability,” the firm said in a statement.
The miller which has in the recent times diversified its product portfolio noted that its new product line of pulses, rice and fish feed has continue to show growth.
The firm is counting on a new 300 tonnes-a-day wheat milling plant in Eldoret expected to be commissioned by July, to increase its output.
The current machine’s output stands at an average 250 tonnes a day.
Seaboard Corporation served on Unga Group Limited a notice of intension to make a boy-out on February 7, 2018.
Working in concert with a group of local investors including Victus Limited, the Delaware-based conglomerate has offered shareholders Ksh40 per share, for ordinary shares.
It intends to acquire an additional 46.1 per cent stake in the miller in a proposed deal that values the entire issued ordinary share capital of Unga Group at Sh3.03 billion.
Victus is associated with the family of former Central Bank governor the late Philip Ndegwa, former President Daniel Arap Moi and Mawara Ltd, which belongs to former East African Breweries chairman Jeremiah Kiereini.
“On February 6, 2018, the Chief Executive Officer of Seaboard Corporation made a corporate decision approving a proposed offer for the acquisition of the shareholding in Unga Group PLC,” Seaboard Corporation said in a statement on February 8.
The announcement was however met with a shareholder uproar.
Shareholders have argued that the offer is 18.8 per cent below its book value of Sh3.7 billion or Sh49.2 per share as of June 2017.
This is considering the fact that the company’s assets including physical structures and leasehold land lack a most recent valuation, having been last revalued in 2013.
The four year gap according to shareholders, has a significant value variation in the wake of rising land and property prices in the country.
In Unga’s latest annual financial report, the firm indicates that the leasehold land was revalued at Sh878.5 million on an open market value basis by Knight Frank Valuers Limited.
As at June 30, 2017, the issued share capital of UGL comprised 75,708,873 ordinary shares of Sh5.00 each, all of which are voting shares.
In a public notice a fortnight ago, Unga Group however said the Ksh40 offer price represents a premium, as of February 6, 2018 which was the last business day practicable prior to the submission of the notice of intention, 40.35 per cent to the closing price of Ksh28.50 per Unga share.
The total consideration for the take-over offer, assuming Seaboard receives acceptances from all the Unga minority shareholders, is estimated to be approximately Ksh1.397 billion, according to Unga.
“CBA Capital Limited, Seaboard’s financial advisor and sponsoring broker has confirmed that Seaboard has sufficient resources and facilities at its disposal to satisfy full acceptance of the take-over offer,” the miller said.
A successful deal will leave Seaboard and Victus in control of the company with the US firm raising its stake in Unga to 66.8 per cent, while Victus will hold the remaining 33.1 per cent.
The two entities plan to delist Unga from the Nairobi Securities Exchange by end of this year if the deal sails through.
Completion of the offer is however subject to fulfillment (or waiver at the discretion of Seaboard where appropriate) of among others —the board of directors of UGL recommending that shareholders of UGL accept the offer.
Seaboard receiving acceptance of the offer on or prior to the closing date in respect of ordinary shares of UGL that, when aggregated with the shares of UGL held by Seaboard and Victus , represent not less than 90 per cent of the issued ordinary shares of UGL.
If the 90 per cent threshold is not achieved but a threshold of 75 per cent or more is achieved when aggregated, Seaboard may at its discretion, proceed closing.
The deal could be derailed if any governmental, revenue collection or regulatory body takes any action or proceedings or make an investigation, which might make the acquisition of ordinary shares of UGL pursuant to the offer void or illegal.
If successful, the buyout will place Seaboard Corporation at the heart of the maize industry in the country, paving way for further investments in the agricultural sector.
Unga Limited is one of Kenya’s oldest and largest millers with over a century of heritage in grain milling.
Its activities are anchored on the manufacture and marketing of a broad range of human nutrition, animal nutrition and animal health products.
In the year 2000, Unga Group entered into a strategic investment partnership with Seaboard Corporation to form Unga Holdings Limited. Unga Group Plc currently owns 65 per cent in UHL.
It’s subsidiaries include Unga Limited, Unga Farm Care (EA) Limited and Ennsvalley bakery limited.
Over 90 per cent of the company’s revenue is derived from Kenya with the remainder attributed to sales in Uganda, Tanzania and Rwanda.
The miller has production facilities in Nairobi, Nakuru, Eldoret, Kampala and Dar-es-Salaam.
Seaboard on the other hand is one of the largest companies engaged in pork production and processing in the US.
It owns 50 per cent stake in Butterball, LLC the largest vertically integrated turkey producer and processor in the United States.
It has substantial operations in 14 African countries among them Mauritius, Mozambique, Botswana, South Africa, Ghana and Nigeria.
Its major investment in Africa is in milling operations primarily for commodity merchandising, grain processing, and sugar production.