SECTIONS

Regulator yet to approve Mumias Sugar takeover

Mumias Sugar Company gate. [Benjamin Sakwa, Standard]

The Competition Authority of Kenya now says it is yet to receive a notification seeking its approval of Mumias Sugar Company’s lease by Ugandan miller Sarrai Group.

In its response to a case filed by farmers, the authority asserts the deal cannot be sealed without its green light.

“The fifth defendant has not received any merger notification from the first defendant (Rao), sixth respondent (Sarrai) or any other party seeking approval of the transaction involving acquisition of the assets of Mumias Sugar Ltd,” says CAK Director-General Wang’ombe Kariuki.

In a separate case filed by Tumaz and Tumaz Enterprises Ltd, Sarrai claimed that it had already taken over Mumias.

The applicants Lambert Ogochi, Augustino Saba, Prisca Ochacha, Robert Magero and Wycliffe Ng’onga claim it was absurd to lease assets worth Sh15 billion for an amount that is three times lower than the total value.

“The applicants who are shareholders of MSCL and farmers who have been supplying the factory with sugarcane are aggrieved by the lopsided deal between the first, second, and third respondents (Rao, Kenya Commercial Bank, and Attorney General Kihara Kairuki) that would sound the death knell to Kenya’s largest sugar plant as a company controlled and managed by its shareholders and board of director,” argues their lawyer Kibe Mungai.

However, Rao and Sarrai want the case thrown out for lack of merit.

According to Rao, the Ugandan miller met the requirements, while Sarrai argues that the case is an abuse of court process as there are other cases on the same issue.

However, the farmers argue that Sarrai will be giving Sh20 million a month from 150,000 tonnes of sugar it mills while other bidders had offered between Sh119 million and Sh250 million. 

They cite New Mumias Sugar Ltd and West Kenya Sugar Company Ltd, which offered Sh250 million and Sh150 million per month respectively.

The farmers say Tumaz offered Sh27 billion for the lease, while New Mumias, which allegedly floated its bid in a joint venture with steelmaker Devki Group, had dangled Sh61 billion. 

The farmers argue that if Rao’s decision is allowed to stand, it will take 10 years and four months to clear KCB’s Sh2.6 billion debt.

Meanwhile, it would have taken New Mumias Sugar and Devki 12 months to clear the same debt. The West Sugar bid would have taken 18 months to clear the debt.

Likewise, it would have taken KE International, which gave an annual bid of between Sh11.4 million and Sh1.14 billion, 90 months to clear the debt.

“The decision of the first respondent to grant the lease of Kenya’s largest sugar plant with a capacity to produce 1.8 million tonnes of sugar per year and annual revenue of Sh2 billion as at the year ending June 30, 2017, to the sixth respondent for a pitiable sum of Sh5.841 billion is not only scandalous but a manifest financial raw deal,” argues Mungai.

Hearing continues from February 14 to 17.