UAP pushes planned listing at Nairobi bourse to 2018

Corporate News

 

UAP-Old Mutual Kenya Group chief executive Peter Mwangi. PHOTO | SALATON NJAU |  NATION MEDIA GROUP

By PETER MUNAITA

In Summary

• Old Mutual took a 60.7 per cent stake in UAP for $253 million in January 2015, just two months after it bought a 67 per cent stake in microfinance lender Faulu Kenya for Ksh3.6 billion ($40 million).
• Navigating the integration of the three businesses has been painstaking with a new operational structure, concluded in October, the only significant milestone so far.
• Integration will involve merging the two holding entities (UAP Holdings and Old Mutual Holdings) and aligning the business lines before bringing the banking (Faulu) and non-banking activities under separate divisions, possibly under different brands.

Financial services group UAP Holdings has pushed back its planned listing at the Nairobi Securities Exchange equity counter as it grapples with integration issues following its acquisition by UK insurer Old Mutual.

Old Mutual took a 60.7 per cent stake in UAP for $253 million in January 2015, just two months after it bought a 67 per cent stake in microfinance lender Faulu Kenya for Ksh3.6 billion ($40 million).

Navigating the integration of the three businesses has been painstaking with a new operational structure, concluded in October, the only significant milestone so far.

“The approvals for the acquisition were received towards the end of the first half meaning the actual integration started in July. We see the integration being completed next year [2016] and the commitment to list not being fulfilled until 2018 at the earliest,” said UAP Group chief executive officer Peter Mwangi.

UAP Group had promised investors, when it borrowed Ksh2 billion ($22.2 million) through a corporate bond in July last year, that its shares would be trading at the Nairobi Securities Exchange by the end of last month. The bond was listed on the NSE debt counter in August last year.

READ: UAP, Old Mutual agree on merger ahead of listing

The debt was meant to support the group’s expansion into Africa where it has a presence in six markets — Democratic Republic of Congo, Kenya, Rwanda, South Sudan, Tanzania and Uganda.

Integration will involve merging the two holding entities (UAP Holdings and Old Mutual Holdings) and aligning the business lines before bringing the banking (Faulu) and non-banking activities under separate divisions, possibly under different brands.

Although the two groups have overlaps in asset management, unit trusts, life and general insurance, the businesses are complementary — with, for instance, UAP being strong in corporate life underwriting and Old Mutual in retail.

The full menu of the combined group — medical insurance and commercial property space complete the range — are only available in Kenya, making integration in the other markets less arduous once the key market is sorted out. All these, including a decision on whether the brands will be exclusive or blend with the identities of the initial entities, are earmarked for completion next year.

One aspect making decisions less straightforward are minority shareholders in the subsidiaries who may require to be accommodated in the new entity through equity swaps, where they trade off their ownership in the old entity with shareholding in the combined business.

“This will require due diligence, valuations, shareholder and regulatory approvals,” said Mr Mwangi. Another issue is what will be the group brand, with Old Mutual competing on its global brand recognition and UAP on its experience in the region.

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