CMA defends approving EABL share acquisition

The Capital Markets Authority has defended its decision to approve the acquisition of shares by Guinness Plc in the East African Breweries Ltd in 2000, despite a public backlash.

CMA chief executive officer Wyckliffe Shamiah told a Parliamentary Committee that the acquisition of additional shares at EABL by Guinness Plc was made within the relevant laws at the time.

Shamiah had appeared before the Senate Standing Committee on Trade, Industrialization and Tourism to respond to a petition filed by a resident of Bomet County regarding what he believed was fraudulent shareholding activities and illegal acquisition of EABL.

In his petition to the committee, Petitioner Rono Nicholas argues that Kenya Breweries Limited is one of the country’s oldest publicly listed companies, having been established in 1922.

This, therefore, means that the decision by Guinness PLC in 2000 to acquire a majority shareholding of EABL was against the public interest, says Rono in the petition filed in June.  

He further notes that despite these dealings and the public outcry that the decision attracted, institutions such as CMA, the Kenya Revenue Authority, the National Treasury and even EABL did not act to reverse the move.

Rono also alleges that EABL has since disposed of some of its properties after the acquisition and repatriated the sale proceeds. It is now a mere shell of its former self, employing a paltry 600 employees.

He argues that when Kenya Breweries Limited was locally owned, it possessed a massive real estate in Kenya that comprised staff houses, staff complexes, godowns and warehouses, factories and other assets and had employed over 6,000 Kenyans.

But CMA CEO informed the committee that in the year 2000, the Authority did not approve any tender offer transaction with respect to Guinness Plc acquiring shares in EABL. 

He, however, noted that in 1997, EABL had sought to raise some money – about Sh1.5 billion – through a rights issue for the expansion programme in Uganda and Tanzania. 

Shamiah was also asked to respond to questions of disclosure on any complaints received from shareholders, relevant stakeholders and the public on the initial acquisition of EABL Ltd by Guinness PLC. 

“In the year 2000, with anticipation that Guinness Plc would offload the shares underwritten in the 1997 rights issue, there was some public debate through the media on the same and subsequently leading to an investigation in November 2000 by the then Parliamentary Committee on Finance, Planning and Trade,” he said.

The Capital Markets Authority CEO also submitted an analysis of the economic benefits the Guinness acquisition in 2000 accrued to Capital Markets. 

He stated that the Authority, in assessing the economic benefits, has relied on information in the public domain, including the audited financial statements of EABL. 

The statements indicate that the value of the total assets of EABL has increased by more than 680% from Sh14 Billion in 2000 to Sh110 billion in 2022.

The recent acquisition of the extra 15% in EABL is a fraud upon the people of Kenya as the shares are being acquired for an onward transfer to a new buyer at a much higher value for the benefit of the shareholders and to the detriment of Kenyan shareholders

Nicholas Rono, petitioner

And on whether there have been any prospects for further acquisition of shares in EABL by any other foreign entity, the CEO explained that as of June 2023, foreigners held 9.304% of the total shares in EABL. 

In his petition, Rono also argues that the recent decision by Diageo PLC to acquire 15% shares in the East African Breweries Limited (EABL) was suspect. 

“The recent acquisition of the extra 15% in EABL is a fraud upon the people of Kenya as the shares are being acquired for an onward transfer to a new buyer at a much higher value for the benefit of the shareholders and to the detriment of Kenyan shareholders,” he argues.

The Committee, Chaired by Kajiado Senator Lenku Ole Kanar Seki, had requested the CMA CEO to provide a detailed report on the initial acquisition of shares by Guinness Plc in EABL that was approved by the Authority in 2000 and give particulars of the tender offering by Guinness Plc including the prospectus filed with the Authority.

He was also asked to justify approval of the acquisition, including any other representations made to the Authority by Guinness Plc and EABL Limited in support of the acquisition. 

The CEO was also required to disclose any complaints received from shareholders, relevant stakeholders and the public on the initial acquisition of EABL Ltd by Guinness Plc and give an analysis of the economic benefits that the Guinness acquisition in 2000 accrued to Capital Markets.