Seaboard Corporation, a conglomerate based in the U. S and with presence in more than 45 nations, is taking over Unga Group PLC (UGL), a public company incorporated in Kenya and listed in the Main Market Segment of the Nairobi Securities Exchange. The NSE suspended trading of Unga shares amid the expected acquisition.
Seaboard Corporation owns a 35 percent stake in Unga Holding Limited (UHL), a strategic investment partnership with UGL. The remaining 65 percent stake is owned by UGL that has grown its operations into Uganda and Tanzania, all of which are engaged in the manufacture and marketing of human and animal nutrition as well as animal health products. Seaboard Corporation is a unique company with a rich history dating back more than 90 years. The company has evolved over time through acquisition, partnership and internal growth though it majorly focuses in grain and agriculturally derived products.
The completion of the offer to acquire the ordinary shares in Unga Group PLC will be subject to fulfillment of a number of conditions. The board of directors of UGL are to recommend to shareholders to accept the offer. Seaboard are set on receiving acceptance on the offer with not less than 90 per cent of the issued ordinary shares of UGL or at Seaboard’s discretion if a threshold of 75 percent is met. No governmental, revenue collection or regulatory body having decided to make any investigations that might make the acquisition void. There being no material adverse change in the trading prospects or financial situation of UGL. Seaboard also seeks for the offer to be completed by 30th September this year.
A hostile takeover is acquisition of a company where the acquirer goes directly to the shareholders of the target company lobbying their support to enable them acquire the company. Normally, the acquirer should present his intention to acquire the target company to the directors of the company who would discuss and present this proposition to the shareholders this is called a friendly takeover. In most circumstances, the decision to acquire the company is unwelcomed by the target company board of directors and may attempt to fight it out through a poison pill. A poison pill action would be an action devaluing the company keeping off the acquirer from acquiring the company.
As at yesterday Unga was trading at Ksh.29.25 so the takeover will be at a premium of approximately 37 per cent with the offer price of Ksh.40. Although being at a premium the offer price is considered to be below the book value which stands at Sh. 70. The UGL shareholders will not receive abnormal returns as expected of a hostile takeover.
A number of changes are expected to be seen in the new company; one, the new company is going to rebrand and diversify their products. With this they may venture in into new markets without going through procedural approvals. Secondly, Seaboard having its majority stake owned by the family of Steven J. Bresky, may resort to laying off employees in phases and bringing on board others, with an aim of giving the company a distinct culture. Thirdly, this could be an opportunity to improve the wheat products offered by the company. Some farmers who buy Unga products have complained of quality and high price.
In order to avoid or minimize hostile takeovers, companies do not float all outstanding shares to the market, they should hold a large percent to the shares such that they have majority voting rights at all times. Companies ought to hedge against losing their businesses through such tactful hostile ways.