A wave of mergers and buy-outs hits Uganda’s corporate market


The wave started early in the year, where 8 Miles, a London headquartered equity fund, announced that it had acquired a 42 per cent
stake in Orient bank Uganda. The deal, said Orient’s vice chairman, Ketan Morjoria, would help turn around the fortunes of the bank, which had struggled to make a profit over the last couple of years.

“We believe there is a lot of potential to turn around the fortunes of Orient bank. The banking sector in Uganda has been growing and
the economy is doing well. We have a very strong plan and strategy for the next three years,” Morjoria told reporters in March. Hemen Shah, a partner at 8 Miles, said “they were looking at a comprehensive business plan to determine how much money they wouldinject in.”

Two weeks ago, Manji Holdings’ Yo Kuku announced that it had merged with South Africa’s RCL food’s Enkoko to form a new firm, HMH Rainbow, with both sides describing it as the “biggest chicken firm in the region.”

RCL Foods will own 33.4 per cent shareholding in the new firm, the company announced at the start of this month. The deal comes hot on the heels of a host of other mergers and acquisitions that have swept across
the country .

In June, Old Mutual finalised the acquisition of the majority stake in UAP Holdings, the owners of UAP insurance, pushing its stake
to 66.7 per cent. Old Mutual, which is originally South African, is listed on the London and Johannesburg stock exchanges. It also took over UAP businesses in Tanzania, Kenya, and Rwanda.

At the beginning of July, the International medical group (IMG) announced that CIEL limited (CIEL), a Mauritius-based investment
firm, through its wholly-owned subsidiary , CIEL Healthcare Limited (CHL), had acquired a majority stake in IMG, the owners of International Hospital Kampala (IHK). IMG said the investment by CHL was the first step in enhancing its future expansion plans throughout Uganda in order to position it as the market leader for private healthcare services in East Africa.

Dr Ian Clarke, the IMG group chairman, described the acquisition as a vehicle to “push IMG to greater heights”. In June, Prudential plc announced it had bought insurance firm Goldstar’s Life Assurance franchise, promising to create a market-leader in life insurance in the country. In May, Kenya’s Brookside Dairy acquired Sameer Agriculture and Livestock, which had been a key player in the milk industry in Uganda. Soon, the country could see Kenya’s Nakumatt finalise
the acquisition of South Africa’s Shoprite, a move that could make it the biggest supermarket franchise in Uganda.

“We will be signing the Memorandum of Understanding with Shoprite to acquire their outlets in Uganda,” Nakumatt Holdings’ head of strategy and operations Thiagarajan Ramamurthy told Kenya-based Business Daily on July 21. The acquisition comes after Nakumatt finalised the takeover of Shoprite Tanzania. Some media reports claim Nakumatt could as well take over Uchumi. Uchumi has experienced low business volumes recently, closing even some of its stores in Kampala,such as the one on Freedom City along Entebbe road, stoking speculation that it might leave soon.

On the global scene, deals such as the one involving Lafarge, the owners of Hima Cement, and Holcim, which was finalised in late May, could mean more opportunities in Uganda’s construction sector.


Ernst and Young, in a report, noted that the trend toward investment outside South Africa is expected to continue. “East Africa (consisting of Kenya, Tanzania, Uganda, Rwanda and Burundi) will be attractive partly because it is doing more than most other African regions to become integrated, thereby facilitating easier cross-border activity and attracting investors,” the audit firm said in a 2014 report.

The EAC has a population of more than 145 million people, a key demographic feature that investors are targeting. Last month, audit firm PricewaterhouseCoopers released a report showing traditional assets under management in key African markets would rise to about $1tn by 2020, up from $293bn of 2008. PWC said that this would largely be driven by a number of factors such as: economic growth and the subsequent rise in wealth, which will boost the demand for pensions and life insurance products; the demand for retail investment funds will consequently increase; and the widespread adoption of technology will make delivery of new products cheaper, bringing more consumers into the formal financial sector.

Uganda has also tried to woo more investors into the country . In June, Uganda Investment Authority hosted a private equity conference in Kampala, where it urged investors and SMEs not to shy away from mergers and acquisitions as an alternative source of affordable finance.

“In this case, private equity firms and venture capitalists look for viable businesses in which to invest their capital and business management practices, while SMEs looking for more than capital in form of money benefit from the partnership, through access to new technology markets and better management practices,” UIA said in a statement.

Paul Lakuma, a researcher at the Economic Policy Research CentreResearch Centre, said the mergers and acquisitions come with opportunities and challenges. Companies being targeted for mergers have the opportunity to raise capital and consolidate their positions. He said there would be challenges because “we are likely to see some firms restructure their workforce to accommodate the new union, sometimes resulting into the loss of jobs.”

Last year when Africell acquired France’s Orange telecom, the firm laid off workers, some of whom decided to sue the firm. Africell said it was cutting costs to bring the firm to profitability. Rahim Manji, the director of Yo Kuku, says their entry is expected to improve the competition within the local market, and offer customers more price options.

“It brings in technical know- how; we will benefit from economies of scale and Ugandans will buy our products cheaply,” Manji said. But failure by firms such as Ugachick to match the lower prices of HMH Rainbow could see them lose customers.


Stephen Kaboyo, the managing director of Alpha Capital Partners, says the mergers and acquisitions have been “long overdue. It’s good to see this kind of developments.”

“When an investor or firm has its market share shrinking, the only option is for somebody to come and puts in equity [through
an acquisition or merger],” Kaboyo said. “M&As help to unlock value for the benefit of the owners. They are a strategic way to grow into a big company and market share.”

While Uganda’s economy is expected to grow at a slower rate this financial year, the long term prospects of the country remain positive, buoyed by developments in the oil and infrastructure industries, which still make Uganda attractive to investors. Uganda will start producing oil probably around 2020 and people’s incomes are projected to grow – key driving factors to corporate firms that have anything to sell, according to one analyst. The country is investing heavily in infrastructure – roads and electricity – an indicator government is trying to remove some of the stumbling costs for businesses.

There are opportunities, too, in the agriculture sector; Manji describes the market for their firm in Uganda as “immense” that just needs to be tapped.

“People can still come and invest. We need a lot of maize, in daily tonnes, and if we got someone to invest there, the market is guaranteed.” And analysts predict there could be more deals coming.

“I foresee the same scenario happen in the telecoms sector in about five years,” said Kaboyo, who is also the Chairman of Uganda
Telecom (UTL).

To Lakuma, the Ugandan economy would have benefitted more if there had been more local firms merging to give them the capacity to compete internationally .


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