Brookside closes Sh1.1bn Buzeki takeover deal

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A supermarket attendant at work in the milk section. Brookside Dairies has firmed its grip on the local milk market with acquisition of Buzeki, the makers of Molo Milk. Photo/FILE  NATION MEDIA GROUP

By BY DAVID HERBLING AND GERALD ANDAE

In Summary

• Milk processor Brookside Dairies has completed the acquisition of Buzeki Dairy — the maker of Molo Milk and Kilifi Gold
• People familiar with the deal said it was priced at Sh1.1 billion and has since received the approval from the Competition Authority of Kenya
• The acquisition pushes the Ruiru-based Brookside’s market share up to 44 per cent and cements the company’s market leadership position

Milk processor Brookside Dairies has completed the acquisition of Buzeki Dairy — the maker of Molo Milk and Kilifi Gold — in a deal that consolidates its grip on Kenya’s formal milk market.

People familiar with the deal said it was priced at Sh1.1 billion and has since received the approval from the Competition Authority of Kenya (CAK), the market regulator.

The acquisition pushes the Ruiru-based Brookside’s market share up to 44 per cent and cements the company’s market leadership position.

Buzeki’s is fourth in a series of takeovers that Brookside has completed in the past six years starting with Ilara in 2007, Delamere and SpinKnit (makers of Tuzo milk brand). Brookside, which is owned by President Kenyatta’s family, has recently cast its eyes beyond the Kenyan borders with the announcement in September of plans to acquire a 20 per cent stake in Ethiopia’s Elemtu Dairy.

The Kenyan firm is also said to be eyeing the Nigerian market where it plans to set up a milk processing plant next year.

The buyout raises Brookside’s installed milk processing capacity by a third to one million litres per day from the current 750,000 litres daily, firming its stranglehold on the dairy market.

“In the next few days, we expect an increase in our daily milk intake with the acquisition of Buzeki,” said John Gethi, the general manager of Brookside in a telephone interview with Business Daily from Marakwet County where he was launching a new milk cooling plant.

The CAK approved the takeover last Thursday, saying Brookside was yet to reach a dominant position in the dairy sector and that informal players account for 88.8 per cent of the milk market.

“The informal sector offers a competitive push to the milk processors making it impossible to dictate prices,” said Wang’ombe Kariuki, director-general of CAK.

“Most processors are county monopolies so there is need to have nationwide players to enhance competition.”

Brookside’s bid to acquire Buzeki has been in the news since June this year but it was only yesterday that Kiprotich Bundotich, the brain behind Buzeki, admitted that he had sold his firm.

“I want to give full attention to my logistics firm in the coming years. I intend to double the number of trucks that I am operating now; that’s why I bowed out of the milk industry,” said Mr Bundotich.

Asked whether he was still a shareholder, he said that the number of shares he currently holds at Buzeki are ‘negligible,’ meaning Brookside has acquired a controlling interest in the dairy firm.

Mr Bundotich turned to Brookside after an earlier deal to sell a 40 per cent stake of Buzeki to the county governments of Nakuru, Baringo, Uasin Gishu, Keiyo Marakwet and Trans Nzoia at Sh500 million collapsed.

Under the proposed sale agreement, each of the counties was to contribute Sh100 million for an eight per cent shareholding, valuing Buzeki Dairy at Sh1.25 billion.