The recent exit of the Kirubi group from UAP Holdings has triggered a fierce dispute among shareholders of Old Mutual, with minority investors expressing frustration over years of dividend drought while the founding billionaires profited from share sales.
This clash highlights the growing tension within the company, as smaller investors seek accountability and transparency in the aftermath of shifts in ownership.
The late business magnate Chris Kirubi, along with James Muguiyi and Joe Wanjui, previously held control over UAP Holdings, a prominent insurance provider in Kenya.
During their reign, UAP Holdings offered lucrative dividends, benefiting investors in profitable years.
However, a regulatory shift forced a restructuring of the company’s ownership, igniting the current conflict.
The introduction of a law capping individual ownership in insurance companies at 25% necessitated changes in how major stakeholders could hold shares.
For Wanjui, this rule was particularly impactful, as his stake exceeded the 25% limit, requiring him to sell off a portion of his shares.
To comply with the new regulations, UAP Holdings was forced to dilute its ownership by selling shares to the public and converting debt held by private equity firms into equity.
This move was expected to culminate in a public offering, with shares being listed on the Nairobi Securities Exchange (NSE) by 2014.
However, the listing has yet to materialize, leaving shares trading in a much less liquid over-the-counter market.
For many minority shareholders, this lack of an official listing has been a sore point, contributing to the growing dissatisfaction with the company’s management.
The tensions as founding shareholders sold most of their stakes to Old Mutual Limited, walking away with substantial profits, while minority shareholders, who held onto their shares, faced dilution and a lack of dividends.
This imbalance has become a focal point of contention, with investors feeling left behind as the company’s financial gains seemingly benefited only a select few.
One prominent minority shareholder, Joel Kibe, has taken legal action against Old Mutual, seeking a buyout at a valuation exceeding Ksh 1 billion.
Kibe, who initially purchased 1.54 million shares for Ksh 290.9 million, alleges that Old Mutual engaged in misrepresentation and failed to disclose critical financial details about the company’s operations and health.
His lawsuit is a rare instance of an investor suing their own company for financial loss and challenging the actions of its directors and managers.
Kibe’s legal battle represents a moment in the ongoing dispute, as he seeks compensation for what he views as a betrayal of trust.
The lawsuit claims that Old Mutual misled investors regarding the company’s financial standing, leading to a devaluation of shares and the eventual dilution of ownership without the promised financial returns.
Kibe’s case poses the growing unrest among minority investors who feel excluded from the decision-making process within the company.
Old Mutual has rejected Kibe’s claims, maintaining that the company operates with transparency and accountability.
However, the mounting pressure from disgruntled minority shareholders continues to put the company in a challenging position.
Investors are calling for more clarity on Old Mutual’s financial practices and decision-making, particularly in light of the exit of founding shareholders who reaped substantial rewards.
The ongoing disputes at Old Mutual highlight a broader issue within Kenya’s corporate landscape, where minority shareholders often feel sidelined by powerful stakeholders.
Old Mutual will likely face increasing scrutiny over its governance practices and how it handles the demands of its investors.
The outcome of Kibe’s lawsuit could set a precedent for how such disputes are handled in the future, potentially reshaping the dynamics of shareholder relations in Kenya’s financial sector.
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