Kuenhe buys Morgan Air after CAK nod

In a move that will strengthen their services in Kenya, the Competition Authority of Kenya (CAK) has approved the proposed acquisition of sole control of Morgan Air and Sea Freight Logistics Kenya Limited by Kuenhe + Nagel (Kenya) Limited, unconditionally.

In a development that revs up the otherwise quiet mergers and acquisitions sector, the acquiring entity -- Kuenhe + Nagel -- will broaden services beyond end-to-end logistics solutions having been in the business of seafreight, airfreight, road and rail logistics and contract logistics for years.

Redeeming units option

The main commercial activities of Morgan Air, the target, includes transportation and delivery of perishables, mainly flowers, fruit, and vegetables by aircraft.  Both companies are incorporated in Kenya.

According to the regulator, the approval was granted based on the two key considerations during merger analysis. “First, the transaction is unlikely to negatively impact competition in the market for air freight forwarding of perishable goods and second, the transaction will not elicit negative public interest concerns,” said CAK in a statement.

There are more than 1,500 freight sea and air freight forwarders registered with the Kenya International Freight and Warehousing Association.

Kenya Airports Authority data indicates that the major market players in this market are Kuehne + Nagel (19.1 per cent), DSV Panalpina (17.2 per cent), Siginon (7.5 per cent), Freight Wings Ltd (6.5 per cent), Freight In Time (5.4 per cent), and Liftcargo (3.6 per cent) among others.

Dealmakers Africa

After the acquisition, the merging parties will control a combined market share of 22 per cent and will continue facing competition from the other market players controlling a combined market share of 78 per cent.

“Premised on this, the proposed transaction is unlikely to lead to a substantial lessening or prevention of competition in the market for air freight forwarding of perishable goods in Kenya,” said CAK in a statement.

The target ’s 129 employees will be retained under the same current terms of employment.

Last year, Kenya sealed merger and acquisition deals valued at Sh148 billion, the highest in the East Africa.

According to data by DealMakers AFRICA deals valued at S 347 billion were sealed in the continent, which is lower than Sh427b made in West Africa.

KCB’s acquisition of Trust Merchant Bank in DRC and Amethis Retail exit of a 40 per cent stake in Naivas were some of the region’s biggest deals in 2022.

of 2022 Read more: https://www.tuko.co.ke/business-economy/economy/498397-kenya-leads-east-africa-valuable-mergers-acquisitions-deals-hit-ksh-148-billion/

Redeeming units option

The deal entails redeeming applications from non-professional investors wishing to redeem up to 36,585,134 units currently listed at the NSE, at a more than 82 per cent premium over the current trading price as at the announcement date.

“The target unit holders will have an opportunity to either redeem their units at a Redemption Offer Price of Sh11 per unit, top up to the Sh5 million professional investors threshold as prescribed by regulatory provisions, or opt to be bundled under a nominee account holding all non-professional investors who fail to take up the redemption offer,” Kihanda said.

This transaction, according to him, provides a viable path to restructure this popular REIT without the price volatility experienced on the NSE.

ILAM Fahari I-REIT CEO Raphael Mwito said alongside the operational restructuring, the firm has continued to perform strategic and operational functions in managing the property portfolio and cash reserves to ensure effective long-term management of the REIT, deliver attractive investor returns and ensure compliance with regulatory and legislative requirements.

“Our active management approach targets quality properties within carefully chosen economically growing nodes,” Mwito said.

Last year, ILAM Fahari I-REIT’s distributable earnings increased by 39 per cent to Sh141.9 million compared to Sh102 million the previous year.

ILAM has been working for the past year to restructure the REIT to ensure its sustainability and improve its ability to generate returns for unit holders. A recent strategy review recommended undertaking an operational restructuring plan, which paved the way for this transaction.

The REIT recently received regulatory approval from the Capital Markets Authority to convert its unrestricted ILAM Fahari Income Real Estate Investment Trust (IFIR) into a restricted I-REIT.

IFIR will remain regulated by the CMA and is registered as a REIT with the Kenya Revenue Authority, thus continuing to enjoy statutory tax advantages.Fraudulent amendments

“Instances of fraudulent amendments to client account information have increased significantly, leading to substantial losses for Investors and potential sanctions to the CDA. It is also a source of significant reputational damage for the market,” said CDSC acting chief executive Jesse Kagoma in a statement.

Last month, a man impersonating various registered shareholders was charged in court with attempting to defraud investors and their respective stockbrokers of shares worth Sh3 million.

Patrick Musau Munguti was charged with stealing and fraudulently selling shares of KCB, Equity Bank, Standard Chartered, Bamburi Cement, Absa, Co-operative Bank, Nation Media Group, Centum and Kengen at stockbroker SBG Securities.

To address these pressing concerns, all CDAs will now be mandated to enforce a set of safeguards with immediate effect.

New regulations

Key highlights of the CDSC’s new regulations include the use of Integrated Population Registration System (IPRS) Verification.

“Brokers dealing with retail investors are strongly urged to implement the Integrated Population Registration System for thorough identity verification during account opening and any subsequent changes,” said the regulator.

Brokers are also prohibited from initiating any amendment requests in the Central Depository System (CDS) before establishing the request’s authenticity.

Dealers must rigorously evaluate and verify the accuracy, thorough verification process serves as an additional layer of security to thwart unauthorized amendments.

Instructions related to account alterations will only be acted upon if they are received through registered telephone numbers or email addresses associated with the CDS account. Any use of alternative contact information necessitates in-person verification to prevent unauthorized access.

By implementing these comprehensive measures, the CDSC aims to restore investor confidence in the financial markets and protect them from the growing threat of fraudulent activities.

Moreover, the stringent regulations are anticipated to safeguard the reputation of the market itself, ensuring its continued stability and credibility. As investors and market participants adapt to the new protocols, a more secure and resilient financial landscape is poised to emerge.