Workers at the Midlands Ltd factory in Njabini, Nyandarua. PHOTO | FILE
By DAVID HERBLING, hdavid@ke.nationmedia.com
In Summary
- CMA has ordered Pearl Capital Partners to immediately withdraw a media notice inviting Kenyans to buy the PE firm’s 70 per cent stake held in Midlands Ltd.
- Pearl Capital had on Thursday last week placed notices in the dailies, soliciting investors to buy 36.8 million shares held in Midlands without seeking regulatory approval.
The capital markets regulator has slammed the brakes
on public sale of shares owned by a Kampala-based private equity firm in
a potato-processing firm entangled in a Kinangop land-grabbing case.
The Capital Markets Authority (CMA) said Thursday it had
ordered Pearl Capital Partners to immediately withdraw a media notice
inviting Kenyans to buy the PE firm’s 70 per cent stake held in Midlands
Ltd, located in Nyandarua County.
Pearl Capital had on Thursday last week placed
notices in the dailies, soliciting investors to buy 36.8 million shares
held in Midlands through the African Agricultural Capital Fund without
seeking regulatory approval.
Former Land minister Amos Kimunya is currently
battling a court case in which he is charged with grabbing 25 acres of
public land and allocating it to Midlands, where he was a director and a
shareholder.
“The authority has not granted approval for the
issue by African Agricultural Capital Fund LLC. In this regard a notice
to cease and desist has been issued to the company in order to protect
public investors,” CMA said in response to queries from the Business Daily.
“The authority is proceeding to engage with the
issuer who is a fund manager licensed to operate in Uganda by the
Capital Markets Authority Uganda in order to determine the way forward,”
CMA said adding that the decision is meant to safeguard investor
interest by vetting the health of any public offer.
The regulator pegged its decision to declare the
Pearl Capital’s offer unlawful on Section 30(A) (4) of the Capital
Markets Act which states “an issuer or an offeror shall not make a
public offer of securities unless that issuer or offeror has submitted a
prospectus in respect of that offer to the authority for approval”.
Pearl Capital is also seeking to sell a shareholder
loan totalling Sh179.9 million advanced to the potato processor, whose
interest rate was not disclosed.
The PE firm’s intended exit from Midlands Ltd has
raised eyebrows given that it bought into the Nyandarua potato company
in January 2013 — which falls short of the typical five to seven years
fund managers take to mature investments in firms they invest in.
Pearl Capital in January 2013 invested Sh200
million in Midlands Ltd — equally split between debt and equity —
through its African Agricultural Capital Fund.
The PE firm, with offices in Kenya and Mauritius,
declined to comment on this story despite promising to issue a statement
on the share offer.
“I will get back to you shortly,” said Bruce
Basimere, chief financial officer at Pearl Capital, in response to our
queries. Midlands is a large-scale potato handling and processing
business located in the potato-growing hub of South Kinangop.
Nyandarua County is reportedly interested in the
plant to raise farmers’ earnings through value addition and supply
stabilisation.
The firm said the capital injection from Pearl
Capital was to help fund capital expenditure, increase in potato storage
capacity and increase range of products beyond vacuum packed whole
peeled potatoes, French fries and bhajias — to include mashed potatoes
and whole unpeeled potatoes.
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