Britam’s buying spree shows insurers are ready to expand beyond region

Britam Group managing director Benson Wairegi (left) and Real Insurance chairman Sam Kamau (right) at the signing of acquisition deal. Photo/Salaton Njau 

By Joint Report The EastAfrican

In Summary

• Britam on Monday published an information memorandum on its intended purchase of a 99 per cent stake in rival Real Insurance in a cash-and-stock deal valued at Ksh1.3 billion ($15.74 million).
• Sources said the firm is also interested in acquiring a substantial stake in a reinsurance company, a deal that could be announced in the coming months.
• Analysts are projecting that the stock could climb higher on account of the planned acquisitions

Kenyan investment firm Britam has emerged as the latest king of acquisitions and investors are noticing this, pushing the share price to a record high since listing three years ago.

With a string of share buyout, the Nairobi Securities Exchange-listed firm seems to be planning to become as big in the regional property market as it is in the insurance and fund management business.

Britam on Monday published an information memorandum on its intended purchase of a 99 per cent stake in rival Real Insurance in a cash-and-stock deal valued at Ksh1.3 billion ($15.74 million).

By Friday, Britam’s share price touched a record Ksh20 ($0.22) a share — 22 per cent above the listing price of Ksh9 ($0.10) in July 2011.

Analysts said the rally, which has seen the share rise by 90 per cent over the past three months, was a result of the company’s acquisition strategy that also saw it buy a 25 per cent stake in property development firm Acorn in November last year.

READ: Foreign investor demand pushes Britam shares to new high

Sources said the firm is also interested in acquiring a substantial stake in a reinsurance company, a deal that could be announced in the coming months.

The Real Insurance deal is structured in such a way that Ksh825 million ($9.7 million) will be in cash and Ksh550 million ($6.4 million) in share considerations.

An extraordinary general meeting to approve the deal is slated for February 19, with the transaction expected to be complete by March 31.

Analysts said in determining the acquisition, Britam considered the strong positioning of Real in non-life insurance, its long operational history and customers that comprise leading firms in Kenya.

“It also considered the growth prospects given the presence of Real in promising frontier markets such as Mozambique, Tanzania and Malawi,” said analysts at Standard Investment Bank in a research note sent out on Monday last week.

Analysts are projecting that the stock could climb higher on account of the planned acquisitions.

“There is still room for share price growth, especially in light of the acquisition and expected value to be unlocked from the synergies,” said Geoffrey Maina, a research analyst at Old Mutual securities.

Britam’s major shareholders include investment banker Jimnah Mbaru, its MD Benson Wairegi, Equity Bank chief executive James Mwangi and Equity Bank chairman Peter Munga — who have emerged the biggest gainers in the rally by virtue of their huge stakes.

The acquisitions sit well with Britam’s three-prong strategy of on expansion of its Kenyan business, entry into new markets as well as growing its property businesses.