Senate Grills CMA CEO on Alleged Share Fraud at EABL

The CEO, Capital Markets Authority today appeared before the Senate Standing Committee on Trade, Industrialization and Tourism to respond to further questions on the Petition regarding alleged fraudulent acquisition of shareholding at the East African Breweries Ltd.

The Committee Chaired by Kajiado Senator, Lenku Ole Kanar Seki had requested the Authority’s CEO to provide a detailed report on the initial acquisition of shares by Guinness Plc in EABL that was approved by the Authority in 2000 giving particulars of the tender offering by Guinness Plc including the prospectus filed with the Authority; and the justification for approval of the acquisition including any other representations made to the Authority by Guinness Plc and EABL Limited in support of the acquisition.

The CEO also was required to disclose any complaints received from shareholders, relevant stakeholders

and the public at large on the initial acquisition of EABL Ltd by Guinness Plc; give an analysis of the economic benefits that the Guinness acquisition in 2000 accrued

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to Capital Markets; explain the parameters for assessing the justification of “strategic growth objectives” in approving acquisition by foreign investors in listed companies; as well as inform the Committee whether there have been any prospects for further acquisition of shares in EABL by any another foreign entity.

In his response, the CEO informed the Committee that in the year 2000 , the Authority did not approve any tender offer transaction with respect to Guinness Plc acquiring shares in EABL. But in 1997, EABL sought to raise money, Kes. 1,500,000,000, through a rights issue for the expansion programme in Uganda and Tanzania.

On the question of disclosure on any complaints received from shareholders, relevant stakeholders,and the public at large on the initial acquisition of EABL Ltd by Guinness PLC. In the year 2000, with anticipation that Guinness Plc would offload the shares underwritten in the 1997 rights issue,there was some public debate through the media on the same and subsequently leading to an investigation in November 2000, by the then Parliamentary Committee on Finance, Planning and Trade.

The Capital Markets Authority CEO submitted an analysis of the economic benefits that the Guinness acquisition in 2000 accrued to Capital Markets. He stated that the Authority in assessing the economic benefits has relied on information in public domain including the audited financial statements of EABL. The Statements indicate that the value of total assets of EABL have increased by more than 680% from Kes. 14billion in 2000 to Kes. 110 billion in 2022.

Explaining the parameters for assessing the justification of “strategic growth objectives” in approving acquisition by foreign investors in listed companies, he pointed out that CMA looks at how the stakeholders in the transaction will benefit. This can be in the form of:Transfer of skills; Sharing of expertise and experience;Technical assistance in operations;Increase in funding and market share;as well as Tax and other incentives.

Lastly, while responding to the question of whether there have been any prospects for further acquisition of shares in EABL by any another foreign entity, the CEO explained that as at June 2023, foreigners held 9.304% of the total shares in EABL. He reported that further analysis conducted in years 2019 to 2023 shows that the foreign shareholding has been decreasing with local shareholding increasing.

Sen. Esther Okenyuri, Sen. Andrew Omtatah and Sen. Betty Montet were physically present in the meeting while Sen. Karungo Thangwa and Sen. Crystal Asige joined the meeting online.