Although billionaire businessman Ngugi Kiuna lost his appeal to the Capital Markets Tribunal to stop the proposed takeover of BOC Kenya Limited by Carbacid Investments, his challenge has ultimately led to the two firms abandoning the transaction.
The two companies formally pulled the plug on the deal on Thursday, saying that the terms of the offer had lapsed, even though the tribunal said in its August 2024 ruling that the approval that had been granted by the Capital Markets Authority (CMA) remained in force.
A years-long quorum hitch at the tribunal had meant that the deal had been held up for four years, taking it well past the July 2021 deadline the companies had initially set for its conclusion.
The CMA, noting the lengthy period since its approval was granted, told the Business Daily in January 2025 that Carbacid would need to update the offer document and the shareholder circular if it intended to proceed with the bid—effectively forcing the company to restart the takeover process.
Following a period of review, Carbacid has now concluded that the offer cannot proceed on the original terms.
“The conditions set out in the takeover offer document to which the offer was subject were not satisfied by the long stop date (July 31, 2021) and therefore the offer lapsed…and will no longer proceed,” said Carbacid in its notice.
The deal was first announced in November 2020 and was initially expected to be concluded by July 2021.
Mr Kiuna, a former BOC Kenya chairman and long-serving board member, subsequently filed his appeal at the tribunal in March 2021, arguing that the CMA erred when approving the takeover by ignoring an undervaluation of BOC Kenya and also disregarded the protection of minority shareholders of the company.
Carbacid, acting in concert with its affiliate Aksaya Investments LLP—which is controlled by businessman Baloobhai Patel— had offered BOC Kenya shareholders Sh63.50 per share or Sh1.2 billion in total.
Mr Kiuna leaned on an independent valuation that put the fair value of the stock at Sh91.76, while also arguing that BOC Kenya’s majority owner, BOC Holdings (UK), had failed to take into account the value of cash and land holdings of the Kenyan unit before making a commitment to sell its 65.4 percent stake to Carbacid at the offer price.
The tribunal, however, found that the mandate of the CMA in approving offers does not extend to evaluating whether a price is good or bad, saying that doing so would go against its oversight role as a regulator.
Additional shares
In the meantime, Mr Kiuna had increased his stake in BOC Kenya, crucially taking his shareholding above the 10 percent threshold that would allow him to block a mandatory buyout of his shares in the event of a takeover.
At the time of his appeal to the tribunal in March 2021, Mr Kiuna held a 7.6 percent stake in BOC Kenya or 1.48 million shares.
In the subsequent four years, he progressively added to his stake, increasing it to 17.66 percent or 3.45 million shares, by the end of 2024.
In addition to the change in the shareholding profile of BOC Kenya, where a minority owner gained enough muscle to prevent a full buyout, the valuation of the company’s stock on the Nairobi Securities Exchange (NSE) and its assets on the balance sheet have also changed significantly over the period.
Stock price
At the time the deal was announced on November 25, 2020, BOC shares were trading at Sh66 each, before going up to Sh69 the following day. The offer price, however, represented a premium of 7.9 percent on the volume-weighted average price over the previous 30 days.
The share closed trading on Friday at Sh80.50 and has averaged Sh83.50 per unit since the tribunal ruling last September.
BOC Kenya’s net assets have since grown to Sh1.9 billion as of June 2024, from Sh1.58 billion in 2021.
Bid for Carbacid
This is also not the first time that a takeover deal between BOC Kenya and Carbacid has collapsed after a lengthy wait.
BOC put in a bid to buy out Carbacid in 2005, but the offer was rejected by the CMA, resulting in a court fight and a subsequent withdrawal of the offer after four years in October 2009. Both stocks had remained suspended from trading during the period.
BOC had hoped to use the buyout to enter the carbon dioxide market, where Carbacid had enjoyed a decades-long monopoly.
Similarly, in its bid for BOC in 2021, Carbacid was looking to gain a foothold in the oxygen and industrial gases market, which is dominated by BOC.
Carbacid is a major producer of carbon dioxide, which is used to carbonate soft drinks, wine and beer, and in solid form as dry ice in the refrigeration of foodstuffs like ice cream and meat products. BOC Kenya, meanwhile, sells oxygen to hospitals and other industrial gases that are used in welding and other applications.
