By James Anyanzwa

The planned sale of the New Kenya Co-operative Creameries (KCC) Ltd has begun, with the Government short-listing four consortia for the role of the lead transaction advisor.

The consortia, led by Commercial Bank of Africa (CBA) Capitals, Dyer and Blair Investment Bank and Standard Investment Bank (SIB), submitted their financial bids on Tuesday last week.

The successful consortium will be picked after three weeks.

The Government’s Privatisation Commission based at Treasury said the advisor would carry out an optional analysis and propose the best method of selling the country’s leading milk processor.

An optional analysis includes, among other things, stakeholders consultation and an intense due diligence on the company’s financial, legal and technical aspects.

The advisor’s recommendations would be presented to the cabinet for approval and later to the relevant parliamentary committee in the August House.

Mr Solomon Kitungu, the Commission’s Executive Director and chief executive said it is still not clear how long the sale process would take as this depended on the mode of privatisation adopted by the advisor.

It is estimated that a normal privatisation process, which involves selling off a state-owned enterprise to a strategic partner, takes between 10-16 months.

On the other hand a private placement — selling shares of a company to a selected group of investors — is much faster.

Other corporations

"The period varies depending on the method selected but we have no idea on the criteria to be used," Kitungu told the FJ adding, "We still have a lot of work to do."

New KCC is among a list of parastatals, which the Government has lined up for sale to the private investors with a view of injecting new capital and enhancing their operational efficiencies through proper technical and managerial expertise.

Others include Consolidated Bank, National Bank of Kenya, Development Bank, Kenya Ports Authority, Kenya Wine Agencies Ltd, five sugar millers (Nzoia, Chemilil, Miwani, Muhoroni and Sony sugar).

Also to be privatised is Muhoroni molasses plant, which is owned on a 50:50 basis between the Government and Mehta Group of India.

Treasury hopes to tap up to Sh6 billion from the sale of some of the assets this financial year (2009/10).

Firm christened

KCC was originally a farmers’ co-operative society but collapsed due to mismanagement.

Private investors bought the firm from receivers in 2000 for Sh447 million.

The Government bought the processor three years later for Sh547 million and renamed it New KCC.

The giant processor made a pretax profit of Sh465 million for the year to June 2008 with turnover increasing by 24 per cent to Sh5.6 billion.

It has, however, been reported that the dairy processor, which recorded a Sh349 million pretax profit in the 2006/07 year, prefers a private share placement with the farmers that supply it with milk.

Milk farmers have been demanding the first priority to buy New KCC arguing the defunct KCC owed them more than Sh1.2 billion and that they were interested in buying into the company through private placement.

It is understood that the New KCC, has not paid farmers since it resumed operations in the year 2003.

Farmers along with the Co-operatives and Marketing Development Ministry have proposed private placement for the company instead of the planned sale through the open market.

—janyanzwa@standardmedia.co.ke