Business

Share sale fans vicious battle for ownership of cement firm

Share sale fans vicious battle for ownership of cement firm
  • Having sensed that all was not well, the Kenyan directors called for a board meeting that was to be held in China on October 16, 2014 but it failed to take place and it was rescheduled to December 16 the same year, this time in Kenya where the breaches by the Chinese investors would be extensively discussed.

  • But, on the material day, Mr Ndeta who was the chairman of the company informed his fellow Kenyan directors that he had bought all the shares held by the Chinese for a staggering Sh1.5 billion.

A cement manufacturing company with a Sh10 billion annual turnover has for the last three years been embroiled in vicious legal wars that have seen its operations crippled through court orders and criminal investigations launched against some of its activities.

LUCRATIVE MARKET

Savannah Cement Ltd based in Athi River, Machakos County was formed in 2010, but by 2014 a series of moves that saw shares sold in unclear circumstances led to legal battles that have persisted to today.

The company was initially formed by a group of Kenyan and Chinese investors who came together to fill a void in the lucrative cement market.

However, one of the Kenyan directors bought off the Chinese in opaque circumstances thereby leading his fellow Kenyan directors to seek legal redress.

The matter has been in the courts since 2016. The Kenyan shareholders were under Savannah Heights Ltd with the following shareholding structure; Donald Mwaura — 30 per cent, John Gachanga though Isinya Plains Limited — 35 per cent and Benson Ndeta — 35 per cent.

The Chinese invested in the company through two companies called Wanho International Limited and ACME Wanji Investment Limited.

Wanho International and ACME Wanji Investment owned 60 per cent of Savannah Cement limited while Savannah Heights acquired the remaining 40 per cent in a deal that was cemented through a Memorandum of Understanding to form the Joint Venture company.

Under the MoU, Savannah Heights owned by the Kenyans was to contribute two parcels of land. LR No. 25517 and LR No. 18474 in Athi River (75 acres) on which a cement manufacturing factory would be built while Wanho International and Acme Wanji Investment were to inject the cash to operationalise the factory with a capacity to produce 1.5 million tonnes of cement annually.

However, the Chinese brought a plant whose output was 800 tonnes of cement and therefore breached the MoU.

Having sensed that all was not well, the Kenyan directors called for a board meeting that was to be held in China on October 16, 2014 but it failed to take place and it was rescheduled to December 16 the same year, this time in Kenya where the breaches by the Chinese investors would be extensively discussed.

COMPLETE DISREGARD

But, on the material day, Mr Ndeta who was the chairman of the company informed his fellow Kenyan directors that he had bought all the shares held by the Chinese for a staggering Sh1.5 billion.

The shares were transferred to a new company called Seruji Company. Directors of Seruji include Yvonne Ndeta, Paul Ndeta, Peter Mukiza, Martin Erich Bachmann and Igor Vishnevskiy.

Interestingly, the Competition Authority of Kenya approved the transfer of shares from the Chinese-owned companies to Seruji Limited a week before Mr Mwaura and Mr Gachanga were informed of the move.

After December 2014, the company went on a tailspin. Since then the board has never met again and therefore the minutes of the meeting of December 16, 2014 have to date, not been confirmed as being a true reflection of what transpired at the meeting.

In his affidavit to the court, Mr Mwaura states that a day after the meeting, lawyer Stephen Mwaniki Njagi as the company secretary of Savvana Cement “trading as Upeo Registrars, proceeded to extract minutes of the December 16, 2014 board meeting in complete disregard of the fact that the minutes had not been confirmed and that he had not even attended the meeting so as to know what transpired.”

“The sale of the Chinese owned shares to Seruji was never approved by the Board of Directors of Savannahh Cement. The board was only informed that the sale had taken place. Lawyer Stephen Njagi did not attend the board meeting held on December 16, 2014 and therefore, he cannot purport to know what transpired in such a meeting. As a matter of fact, the minutes of the meeting were taken by the managing director because the company secretary was not present,” states Mr Mwaura.

OWNED ILLEGALLY

He adds that through an e-mail, the managing director, Mr Ronald Ndegwa, had confirmed that he was working on the meeting’s minutes.

“I wish to point out that there is a shareholders’ agreement between Savannah Heights, Wanho International and ACME Wanji Investments detailing the procedure of transferring shares to a third party. Under the said agreement, there are certain condition precedents which were required to be met before completion of transfer of shares to a third party. I confirm that, to the best of my knowledge, the condition precedents have not been met and as such, the transfer of shares to Seruji Limited cannot have taken place.”

In his replying affidavit, Mr Ndeta denied that Seruji acquired the shares owned by the Chinese investors illegally.

He said that his fellow Kenyan directors had not completed paying for their shares, adding that the sale of the shares is covered by the shareholders’ agreement and not the MoU.

“The MoU was superseded by the shareholders’ agreement. Any alleged obligations or breaches under the MoU are irrelevant for the purposes of these proceedings. … Wanho’s and ACME’s shares in the company were held without any condition and they had full rights to deal with the shares in the way that they did,” he sates.

He argued that Savannah Heights was fully involved in the buying of the Chinese-owned shares.

He admits that he bought the shares and that his fellow directors were formally informed.

NULL AND VOID

“Even assuming that Mr Mwaura and Mr Gachanga did not approve the transfer of shares in the company to Seruji, the majority of the board of directors at that meeting including Mr Li Jinchen who was authorised to represent four other directors of the company approved the said sale,” he said.

In the suit, Mr Mwaura and Mr Gachanga are seeking orders to have the sale of the Chinese owned shares to Seruji be declared illegal, null and void.

They also want a declaration that the Registrar of Companies ordered to expunge all the documents filed at the Companies Registry purporting to transfer shares from the Chinese owned shares to Seruji.

Even as that suit goes on, Mr Mwaura and Mr Gachanga cannot sit in any board meeting after their attempt to bar new Seruji Limited directors from joining the company were thwarted by the High Court. In a ruling by Justice Farah Amin, the court appointed a new board that included the directors of Seruji. The judge also barred Mr Mwaura and Mr Gachanga from interfering with the running of the company.

The duo moved to the court of appeal where they challenged the decision of the judge on grounds that the orders were issued on grounds that had not been canvassed in court.

The two cases were filed in 2016 and are yet to be decided.