James Finlay sweetens exit deal with locals shareholding

Multinational tea firm James Finlay Kenya has offered a 15 per cent share of its estates worth Kes560 million to locals in Bomet and Kericho counties where it operates as part of a deal to sell its stake to a private equity firm.

Reports indicate that Kipsigis Highlands Multipurpose Cooperative Society (KHMCS) has formally started helping its members to buy the shares in a deal expected to be completed within six months.

Sri Lanka-based Browns Investments PLC is finalising a deal with James Finlay to take over the estates for an undisclosed sum, with the 15 per cent stake set to be retained for the local community.

Browns is part LOLC Holdings Plc, Sri Lanka’s second-largest publicly traded company that recently bought Key microfinance previously known as Remu Microfinance.

British multinationals making a quiet exit from the business rocked with political fights, ending land leases, opposition to mechanization and a tough market need local support as they exit.

James Finlay vast lands

The companies have faced intense fights over very lucrative properties they have held since the colonial era as climate change makes the fertile Rift Valley lands the last food baskets.

About 23 of Kenya’s 47 counties are classified as arid or semi-arid lands (ASALs) and only about 18 percent of the country’s land area is agriculturally productive: the central and western highlands, split by the Rift Valley. This zone has a temperate climate often experiencing medium to high rainfall. Kenya is warm and humid in the coastal region with very dry arid interior usually marked by low and unevenly distributed rainfall over much of the tropical country.

A section of MPs from the Rift Valley, President William Ruto’s backyard and the country’s food basket, have previously voiced concerns over renewals of the lease holdings of individuals and multinational companies after the 2010 Constitution terminated 999-year leases to a maximum of 99 years; singling out James Finlay, Unilever and George Williamson tea companies, which own vast lands in Kericho, Nandi and Bomet counties.

The MPs imputed transfers of the lands and properties whose state of their leases remained unknown and without consultations with the local community representatives.

When Unilever recently sought to exit Limuru Tea to CVC Capital’s Ekaterra, they faced local shareholder push back that has dragged the deal in court and at the capital markets regulator due to lack of local investors buy in.

Read also: In Kenya, ‘Nikw’a ngwete’ famine of dying while holding money unfolds

Undervaluing firm at NSE

The minority shareholders asked the Capital Markets Authority (CMA) to investigate Limuru Tea accusing the firm of valuing its land holding at Kes1 million against an estimated value of Kes23 million per acre or a total of Kes16.2 billion. This means with Kes1 billion, one can buy the entire stake of Limuru Tea and get land worth Kes16.2 billion, grossly undervaluing the company at the Nairobi Securities Exchange (NSE).

Finlays is seeking a quieter exit having stripped the business lucrative flower business that was making about Kes1 billion a year and transferring lucrative land holdings. The company has also cut down on employees from 8,102 in 2019 to 5,894 by 2021.

“On August 2021, a sale contract was entered into for the disposal of the business and assets of the Lemotit Flowers and Forestry operations. Completion of the sale is subject to approval of the Kenyan competition authorities and transfers of two land title deeds, it is anticipated that this process will take four months. In 2020 the revenue of the disposed operations was GPB 5 million,” the company said in the 2020 Annual report.

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