Pure speculative thinking. Or the beginning of my career as an M&A specialist. Also published in the Business Daily at http://www.businessdailyafrica.com/Opinion-and-Analysis/Barbarians-at-the-sisal-gates--Bid-for-Vipingo-heralds/-/539548/2105192/-/j35a73/-/index.html
Have you ever wanted to live through a
thriller? Were you ever afraid that all the great business stories had passed
you by? The best business book of all time (in my not-so-humble opinion) is
‘Barbarians at the Gate’, the 1990 book by journalists Bryan Burrough and John
Helyar about the fight for takeover of RJR Nabisco. Private equity firms, full
of colourful characters, went at each other hammer and tongs for the prize of a
conglomerate that produced a whole gamut of products from biscuits to
cigarettes.
Well, James Mworia, the Chief Executive of
buyout firm Centum right here in Nairobi, is not quite a barbarian (for one, he
looks too mild-mannered for such an epithet to be plastered on him), but he
certainly is at the gate, and you can be assured that the same killer instinct
that drove men such as Henry Kravis and Ted Forstmann is as alive in him.
Perplexed? Let me explain.
Rea Vipingo, the sisal and farming outfit
that is a perennial member of the Nairobi Securities Exchange, received an
offer a couple of weeks ago to take it private. The bidders were a pair of
British brothers – Richard and Jeremy Robinow – who own a significant chunk of
stock in the firm, and wanted to buy out shareholders at KSh 40 a share. All
par for the course for the staid, genteel world of public companies in Kenya.
Until last Wednesday. Centum made an audacious swoop to counter REAT (the
Robinows’ acquisition vehicle). Audacious because it was unexpected, but also
because of the size of the share offer. Centum offered KSh 50 a share, 25% more
than the Robinows, but also a premium of 78.6% to REAT’s prize.
So we’re in for exciting times. Which then
got me thinking. If we’re going to live through the rollercoaster of mergers
and acquisitions to shake up Kenya’s corporate scene, what other deals out
there might get Kenya’s investment bankers salivating? So, come with me as we
indulge in a bit of speculative fantasy. I’m no investment banker, so these may
never pan out (or even make strategic and financial sense), but they do make
for interesting discussion over the rounds of Jubilee and Christmas parties
about to be upon us.
Airtel
and the Wananchi Group
First, full disclosure: I worked at the
Wananchi Group as a consultant, and helped launch the Zuku triple play brand in
2008. With that out of the way, this would be a mightily intriguing tie-up.
Airtel, the country’s second largest mobile operator, is treading water. Its low
cost strategy has largely gone nowhere, with the big fish Safaricom still
controlling two thirds of the industry and a huge chunk of its profits. This is
not the time to explore the company’s strategic missteps, but the Indian firm
does need a competitive jolt.
In comes Wananchi. The company has been on
a tear building out its fibre network, and making a consumer offering of data
(internet), television and voice. This makes it a perfect strategic fit for
Airtel. A merger would goose up Airtel’s offering, and give the combined
company the ability to offer quadruple play to its customers.
Will this one happen? I don’t know, but
there is a precedent. The other day, a little bird whispered to me that
Safaricom had made a bid for Access Kenya, when the Somen brothers put the
internet company into play. The bid did not succeed, but it does show that the
thinking behind this is solid. Actually, seeing as Safaricom is on a much more
solid financial footing than Airtel, wouldn’t a Safaricom-Wananchi tie-up be
even more intriguing? Hmmmm.
Kenya
Railways Spinoff/ Buyout of Citi Hoppa
Yes, this one would be caught up in the
mechanics of public procurement rules, and trains and matatus do not go
together (as was witnessed a few weeks ago in Umoja), but think: If KR was to
spin off its urban rail operations, and this new entity then buys a road-based commuter
company, it would offer a seamless urban transport solution that would be
irresistible. Passengers would ride into the Nairobi Railway station and hop
into buses using the same ticket, and Nairobi’s transport woes would be eased.
Would it make money? With the right kind of regulatory protections, why not?
Kenya
Broadcasting Corporation
(Another quick disclosure: I hosted a talk
show on KBC for a few months in 2010).
This is a company deep in debt, and left
far behind in the ratings game on both radio and television. However, it does
sit on some of the best land in the country, and has an unrivalled library of
footage, as well as aging but serviceable equipment. So, spin off a pure
commercial entity, which would monetise this footage (this was the entire
strategy behind Turner Classic Movies, which bought and re-packaged the
Metro-Goldwyn-Mayer library), and build soundstages for local productions. The
rump public broadcaster, with the right strategy in place, can become a
faux-BBC, with high quality, publicly-funded programming. I know this has been
on the table in some fashion before, but it’s now time to pull the trigger.
As I said, these are idle musings at the beginning
of a rainy December, and you’re free to laugh them off. But if any of them do
pan out, please mail the cheque for my fees to the 5th floor, Nation
Centre.
Interesting thoughts
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