Concerns Raised Over Protection of Small Shareholders in Bamburi Cement Takeover Bid

The ongoing bids for the takeover of Bamburi Cement have raised alarms over the protection of smaller shareholders, with Bunge La Mwananchi, a prominent Kenyan civic organization, urging regulators to step in and ensure compliance with investor protection laws.

In a letter addressed to the Capital Markets Authority (CMA), the group outlined a series of concerns about the financing behind Savannah Clinker Limited’s offer for Bamburi Cement. Chief among the issues highlighted were questions surrounding the credibility and transparency of the American nonprofit Global Infrastructure Finance and Development Authority Inc. (GIFDA), which claims to be financing the bid.

According to Bunge La Mwananchi, GIFDA’s questionable track record raises significant concerns. Although GIFDA presents itself as a major player in infrastructure finance, the group points out that there is no verifiable evidence of completed projects, including the much-touted Port Trajan, Port Ostia, and Port De Claudius, which GIFDA claims to have funded. The lack of transparency around GIFDA’s financial backers, combined with its unclear affiliation with Ameri Metro, Inc. – a company cited for regulatory non-compliance in the United States – has further fueled suspicions about the legitimacy of the funding.

The letter also addresses the role of Faida Investment Bank, which has issued a “non-recourse” letter in support of Savannah Clinker’s offer. This means that the bank would not be liable if Savannah Clinker fails to meet its financial obligations to shareholders who accept the offer. According to Bunge La Mwananchi, this stance undermines investor protections and leaves smaller shareholders vulnerable to substantial risk.

Further raising red flags, the group also pointed to a late change in the payment bank for the offer, from Stanbic Bank Kenya to NCBA Bank. The switch has prompted questions about the due diligence conducted by the involved parties and whether there are undisclosed risks behind the sudden change.

Perhaps most concerning, according to Bunge La Mwananchi, is the background of Savannah Clinker’s owner, Mr. Benson Ndeta. The businessman has a history of mismanagement, including leading two Kenyan cement manufacturers into financial distress. Reports indicate that Ndeta’s companies are currently saddled with Kshs 19 billion in debt, which raises serious doubts about his ability to fulfill the obligations of the takeover bid.

In light of these concerns, Bunge La Mwananchi is calling on the CMA to take swift action. The organization has urged the authority to investigate GIFDA’s financial capacity, assess the compliance of Faida Investment Bank, and ensure that minority shareholders are adequately protected under the Capital Markets Act. Additionally, the group has requested a thorough examination of Savannah Clinker’s ownership and financial history.

Bunge La Mwananchi’s letter highlights the critical role of the CMA in ensuring transparency and fairness in Kenya’s capital markets, urging the regulator to act decisively to uphold investor protection and market integrity. The group is also seeking reassurance from the CMA on the steps being taken to address these concerns, stressing the urgency of the matter for the future of Kenyan investors and the broader market.

As the situation continues to develop, all eyes will be on the CMA to determine whether it will take the necessary steps to safeguard the interests of minority shareholders in the Bamburi Cement takeover.