EABL, Actis locked in fight over Sh1.9 billion land deal

Corporate News A section of the East African Breweries Limited plant in Ruaraka, Nairobi. FILE | NATION MEDIA GROUP 

By BRIAN WASUNA

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Summary

• At the centre of the dispute is a deal EABL struck to sell Actis 15 acres of land at a price of Sh1.95 billion, but the private equity firm on October 12 last year sent a notice to the beer maker cancelling the offer to buy.
• The notice also included a demand that EABL refunds the Sh1.9 billion Actis had released to the beer maker as per the sale agreement.
• The private equity firm backed out of the deal after EABL allegedly turned its back on a promise it made to build a new head office on the land where Actis planned to develop a business park.

Beer maker East African Breweries Limited (EABL) and UK private equity firm Actis are locked in what is promising to be a bruising battle over a multi-billion shilling land deal gone sour.

At the centre of the dispute is a deal EABL struck to sell Actis 15 acres of land at a price of Sh1.95 billion, but the private equity firm on October 12 last year sent a notice to the beer maker cancelling the offer to buy.

The notice also included a demand that EABL refunds the Sh1.9 billion Actis had released to the beer maker as per the sale agreement.

The private equity firm backed out of the deal after EABL allegedly turned its back on a promise it made to build a new head office on the land where Actis planned to develop a business park.

Actis was to complete the land deal through Kasarani Investment Holdings Limited (KIHL) — a subsidiary of the private equity firm.

Details of the fallout have been revealed in a suit Nairobi law firm Kaplan & Stratton has filed in court, seeking to protect its interests.

Kaplan & Stratton, which is holding the Sh1.95 billion in an escrow account, says Actis wrote to it in October last year threatening to take unspecified action if the law firm did not refund the Sh1.95 billion together with interest accrued.

EABL has, on the other hand, objected to the letter rescinding Actis’ offer and demanded that the funds be held in the escrow account until the parties resolve the dispute. Kaplan & Stratton has enjoined EABL and KIHL in the suit.

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Withdraw suit

Actis, EABL and Kaplan & Stratton last week agreed to withdraw the suit, arguing that they are in out-of-court talks, and that if no deal is struck within 14 days, any of the parties will be free to refer the matter to arbitration.

Actis has, in an affidavit filed in court, claimed that EABL was to confirm its commitment to the deal as well as meet other conditions before September 30, last year but failed to do so, forcing it to back out.

EABL insists that it had requested Actis for a one-month extension from September 30, and just 10 days later confirmed that it was willing to have its head office developed on the land.

The beer maker says that despite the assurances to Actis, the private equity firm purported to rescind its offer to purchase the 15-acre land in Kasarani, leading to the stand-off.

“At the status update meeting (on October 10) and at the express request of KIHL, EABL confirmed that it was substantially ready to comply with the conditions within a few days. Notwithstanding the assurances given by EABL to KIHL regarding its preparedness to complete, KIHL purported to issue a recession notice,” the beer maker says.

EABL says that upon receipt of the purported recession notice it issued a letter dated October 13, 2016 rejecting the purported recession notice on the basis that it was defective.

But Actis holds that EABL’s request for a one-month extension to get necessary corporate approvals came only three days to the September 30, 2016 deadline that had been set.

The private equity firm says it was unable to approve EABL’s request for more time before the September 30 deadline, and that it was unsure of getting management approvals for the extension.

EABL now says that it took KIHL’s failure to respond to its request for extension of time to mean the private equity firm had agreed.

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Recession notice

The brewer claims that the recession notice sparked a dispute that needed to be resolved through arbitration as provided for in the sale agreement.

But Actis insists that EABL had not specified the nature of the dispute it wanted to be referred to an arbitrator, which was a clear indication of foul play by the brewer.

“It was not clear whether such approval would be granted given the fact that it had been over 15 months since the sale agreement was signed and a 30 per cent deposit paid and almost four months since the full balance of the purchase price had been paid,” Actis says.

The private equity firm argues that it was grossly unfair for EABL to fail to fulfill the conditions of the deal and then subsequently direct Kaplan & Stratton not to comply with their duty as escrow agents to release money to KIHL without any attempt to give reasons.

Actis is said to have argued during a meeting with EABL that the project only made sense if the beer maker committed to taking up office space on the land.

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EABL says that since the standoff, it has engaged Actis and its subsidiary KIHL in goodwill talks with a view to reaching a solution that is agreeable to both parties but that is yet to come through.

Actis, through KIHL, paid Sh585 million or 30 per cent of the purchase price in June 2015 before remitting the 70 per cent balance of Sh1.365 billion in May last year to Kaplan & Stratton, the escrow agent.