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Merali’s Midas touch

Updated Tuesday, September 27th 2011 at 00:00 GMT +3
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By Kenneth Kwama

Could the sprawling business empire of Naushad Merali be crumbling?

This is the question quietly doing rounds in business circles, as it emerges that one of his bastions — Kenya Data Networks (KDN) — is beset with financial difficulties and shareholders could be preparing to fire its entire management team.

Naushad Merali

KDN’s managing director Rikus Mattyser has barely lasted one year on the job. It even seems unfair to blame him or his management team for the firm’s perceived financial difficulties, but the fact that Merali has over the past four years sold substantial portion of the company he virtually owned to Allied Technologies Ltd (Altech) of South Africa shows a trend that has become a hallmark in his business dealings. Sameer ICT— a subsidiary of Merali’s investment vehicle Sameer Group — owned 96 per cent of KDN while the firm’s former managing director, Kai Wulff held a four per cent stake, until 2008, when Altech bought a 51 per cent share in the company. Sameer, which is named after Merali’s son, offloaded more of its shares in KDN last year.

Smart move

Altech bought the shares and increased its shareholding to 60.8 per cent. Incidentally, KDN announced a pre-tax loss of close to Sh170 million for the year that ended February last year.

The question is: Did Sameer cash out to limit the impact of KDN’s perceived dwindling fortunes on its balance sheet, or it was a case of Merali’s diminishing options?

"I don’t think it is his empire crumbling. Merali is a suave business mind. He is simply making a smart business move. This is what he did with Eveready and Celtel. His empire is so vast, this wouldn’t dent it in any way," says the director of an investment bank in Nairobi, who requested not to be named because his firm handles some of Merali’s investments.

The idea of offloading substantive shares in companies that are seen to be performing well, but whose fortunes start to dwindle immediately thereafter is a trajectory that mirrors just about every element of Merali’s business interactions.

He has often pulled some of the smartest business moves in corporate Kenya, but the deal that made him newspaper fodder happened in March 2004 and could as well go into history as the largest profit ever made by an individual businessman in the shortest time possible.

The out-of-the-ordinary deal took place when an executive from French mobile firm Vivendi, which was Merali’s co-shareholder in then Kencell flew down to Nairobi to inform him that they had signed a contract agreement to sell their 60 per cent stake to MTN for Sh18 billion. At the time, MTN was said to be so confident about clinching the deal that they even leaked out stories to the South African press about the same.

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