The Capital Markets Authority (CMA) has cautioned Kakamega County’s bid to take over the cash-strapped Mumias Sugar #ticker:MSC, saying the action is in breach of the law.
Chief executive Paul Muthaura, in a letter addressed to Governor Wycliffe Oparanya dated May 29, said the law must be followed in plans to take over Mumias, the miller’s board and management.
He said media reports of plans to take over Mumias Sugar create uncertainty given the miller is a publicly-traded company at the Nairobi Securities Exchange (NSE).
He told Mr Oparanya to follow the law guiding listed companies, including making a buyout offer to Mumias owners or seek shareholders’ approval when ousting directors.
Mr Muthaura said any planned takeover of a listed firm involves the making an offer for acquisition, “by or on behalf of a person of all voting shares in the offeree or shares that will result in an offerer acquiring effective control in an offeree”.
Losses have seen Mumias share at the NSE plummet to Sh0.31 each, valuing it at Sh520 million. The firm is technically insolvent to the tune of Sh6 billion after sinking further into the red that has seen its total liabilities surpass total assets.
The losses in the year ending June 2018 rose to Sh15.1 billion from Sh6.8 billion in the previous year while its assets stood at Sh15.7 billion against liability of Sh21.6 billion.
“Kindly further note that MSCL, being a listed company is governed by the Capital Markets (Securities) (Public Offers Listing and Disclosures) Regulations 2002 (as amended). In this regard any decision to change directors of MSCL can only be made through a resolution of the shareholders passed in a properly constituted annual general meeting,” said Mr Muthaura.
“Whereas the authority understands the concerns expressed for the county stakeholders that rely on MSCL, it is important that there is full adherence to the Laws of Kenya and specifically the Capital Markets Act.”
The CMA warning comes days after Mr Oparanya formed a committee to oversee the revival of Mumias, including managing the company assets.
The move came after Mr Oparanya said the county would take over the operations of the factory. He named a 12-member committee led by Kakamega Trade and Industrialisation executive Kassim Were and county attorney Moses Sande.
The team has been mandated to oversee the management of the company’s nucleus estate farms, safeguard its assets and map out a revival plan.