Britam, Cytonn serve up 2014’s fiercest corporate battle

Money Markets

Edwin Dande, CEO of Cytonn Investments PHOTO | FILE  NATION MEDIA GROUP

By BRIAN WASUNA

In Summary

• The legal tussle was triggered by the exit of four BAAM executives to form a new advisory company, Cytonn.
• Within weeks of formation, Cytonn were the lead transaction advisors for projects worth about Sh40 billion.

Investment firm British-American Investments Company (Britam), private equity fund Cytonn and real estate developer Acorn served up what was arguably 2014’s biggest corporate legal battle.

The tussle, which has attracted a multiplicity of lawsuits, was triggered by the mass exit of four British American Asset Management (BAAM) executives to form their own advisory company, Cytonn.

But Britam moved to court soon after seeking to recover some Sh3.9 billion it claims the former BAAM managers illegally transferred to the accounts of companies affiliated to Acorn – a real estate developer in which Britam has a stake.

Among the prayers Britam sought was the blockage of bank accounts belonging to four special purpose vehicles that Acorn had formed to develop various real estate projects.

The Sh3.9 billion that Edwin Dande (former chief executive), Shiv Arora (investment analyst), Patricia Wanjama (head of legal) and Elizabeth Nkukuu (portfolio manager) allegedly shipped out before leaving Britam were moved to the four accounts.

The four former Britam employees formed Cytonn shortly after leaving Britam, and bagged several projects they had initiated while still working for Britam’s asset management subsidiary.

Within just weeks of its formation, Cytonn had been appointed the lead transaction advisors for a series of projects estimated to be worth Sh40 billion – including a large proportion from Acorn. Britam would not take it lying down.

The investment firm, through law Fred Ngatia launched one of corporate Kenya’s biggest legal battles that has since been widely described as an ‘old money versus new money’ war owing to the age difference between Britam’s owners and the Cytonn managers.

“The four former Britam executives irregularly and without authority transferred the cumulative sum of Sh3.9 billion being money belonging to the British American Asset Managers (BAAM), to bank accounts operated by the 8th to 12th respondents,” Britam said in a sworn affidavit.

In a replying affidavit filed in court mid-November, the Cytonn executives insisted that the transfers were approved by BAAM’s designated signatories, and that the suits were a wild goose chase aimed at arm-twisting Acorn into selling a majority stake to Britam.

“I personally informed the board of the deal pipeline… the Britam executive committee was also aware of this deal pipeline. These disbursements had been approved for the specific SPVs prior to release of the funds,” Mr Dande said in suit papers.

Acorn, which was sourcing funds for its multi-billion shilling development projects, had in October announced its decision to ditch BAAM for Cytonn arguing that it entrusted the project to the four executives and was willing to move with them to their new home.

Acorn also filed an application seeking to have Justice David Onyancha disqualify himself from the case, arguing that Britam’s advocate Fred Ngatia had acted for the judge in other suits, raising the question of conflict of interest. Justice Onyancha is yet to rule on the application.

Meanwhile, Britam pushed for the arrest and charging in court of its former employees and Acorn executives for criminal offences, a move that required them to appear before the Chief Magistrate’s court on November 14.

The accused however hit back at Britam by filing petitions in the Judicial Review Division of the High Court where they claimed that the investment firm had, in fact, not lost any funds but was using suits in the civil division to blackmail them.