The High Court has unlocked ScanGroup’s sale
of Sh5.35 billion ($50 million) stake in a data and research firm after
a judge allowed the firm to hold an online shareholder meeting to
approve the deal.
The deal was on the brink of collapse
because ScanGroup had been unable to hold a shareholder meeting ahead
of the May 30 deadline to close the transaction due to the ban on mass
gathering in the wake of the Covid-19 pandemic.
The
court last week approved a deal between ScanGroup and the Capital
Markets Authority (CMA) allowing listed firms to hold virtual
shareholder meetings and online voting on corporate actions that require
owners’ approval.
ScanGroup
will now hold a virtual extra-ordinary general meeting (EGM) on May 27
to approve the Kantar deal, which will see the firm offer its
shareholders Sh4.60 per share as special dividends from the Sh2.6
billion profit on the transaction.
It
had targeted to announce the dividend when unveiling its 2019 financial
report, but the shareholder meeting hitch forced it defer the payout.
The CMA had frozen shareholder meetings
in line with the government’s directive that prohibits mass gatherings
like meetings, weddings and funerals to contain the spread of the
coronavirus.
The regulator also
advised firms to hold virtual meetings, in effect freezing deals that
required shareholder approval in companies whose articles of association
do not provide for online AGMs like ScanGroup.
“Shareholders
of ScanGroup stand to lose the benefit of the proposed disposal whose
value is over Sh5 billion,” said Terry Mwango, a lawyer at Bowmans
Kenya, in her petition to the High Court.
“There
will be no prejudice to the shareholders of ScanGroup if the EGM is
held virtually as demonstrated in the petition.” Justice David Majanja
last week allowed companies to hold virtual shareholder meetings during
the coronavirus period despite their internal rules not expressly
providing for online voting.
The
order cushions listed firms like ScanGroup from court action should a
shareholder or interested party challenge decisions reached through
virtual meetings.
The company,
which last week announced a 20 percent drop in net profit for the year
ended December 2019, had earlier projected to sell its 60 percent stake
in Kantar by March 2020. Scangroup’s London-based parent company WPP,
which initiated the transaction, has already completed the sale of its
60 percent equity in Kantar ahead of schedule.
Scangroup
will receive about Sh5 billion in the transaction and will use Sh2
billion or 40 percent of the proceeds to pay a special dividend. This
will amount to a payout of about Sh4.6 per share.
According
to an existing agreement between WPP and Scangroup, the global deal
also commits the Nairobi Securities Exchange-listed firm to sell its
stakes in Kantar affiliates it owns in Africa.
These
include scores of operating units in various African countries housed
under investment holding companies Millward Brown and Research and
Marketing (which Scangroup acquired just last year).
The
company invested Sh1.2 billion to acquire a 100 percent stake in
Millward Brown and also incurred a similar expense in cash and stock to
take an 80 percent equity in Research and Marketing.
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