Tragic incident haunts tycoon’s battle to take over Rea Vipingo

In 1964, a year after Kenya’s independence, Somchand Devji Shah, won a Government tender to operate a large sisal plantation and factory in Embu on lease.

The estate, called Mecca Sisal Development, sat on 7,000 acres and was opened by President Jomo Kenyatta.

Mr Shah was a second generation Kenyan India, his father Meghji Kanji, had come into the country in 1910, just when the construction of the railway line began.

The family were….. farmers in India, and they had started building their wealth in agriculture in Kenya.

They got into coffee trading in the 1940s, and followed this with the manufacture of gurney and sisal bags in the late 50s through ACIM Limited, a factory in Thika.

Black gold

The family was in a very enviable position as Kenya headed into independence. They had invested in the country’s “black gold” and controlled the manufacture of bags used to package agricultural commodities.

In 1962, as the British started packing their bags, Shah — or “Som” as he was affectionately called — was one of the first to acquire coffee estates from the departing British. He bought six in central Kenya.

It laid the foundation for the family to increase their investment in agriculture, particularly in coffee and sisal.

Half a century later, Som’s son, Dilesh Somchand Bid, 58, made his presence felt.

On December 10 this year, Mr Bid offered Sh55 per share to shareholders of the Nairobi Securities Exchange-listed Rea Vipingo, the largest producer of sisal in Africa.

He put up the offer through WWWBID Investment Company Ltd. His investment company will be working with Kenyalogy.com, which owns 1.4 per cent of Rea Vipingo.

Bid’s offer is double the Sh27.50 Rea Vipingo’s shares were trading at when they were suspended after majority shareholders, the UK’s Robinow brothers, made an offer for the firm through their company, REA Trading. Richard and Jeremy Robinow offered Sh40 per share.

A few days later, Centum Investments, a private equity firm with a 0.5 per cent stake in Rea Vipingo, countered that offer with a Sh50 bid.

It precipitated the first outright bidding war for a company at the NSE.

Prior to the Rea Vipingo take over, few Kenyans had heard of Bid. Keen newsreaders, however, will remember he was the driver behind a traffic offence in October last year that resulted in the death of a teenager on Thika Road.

As Bid seeks to get a bigger share of the sisal business, he is worried by reports that the Director of Public Prosecutions, Keriaki Tobiko, is allegedly planning to review the case in which Bid was charged with dangerous driving leading to the death of Yvonne Chepng’etich.

Making his move

Over the last few years, Bid said, his family has been buying into Rea Vipingo, which has seen them become one of the firm’s largest shareholders.

When the Robinow brothers made their offer, it was time for him to also make his move. The land on which Rea Vipingo sits is 10 times larger than the Mecca estate his father, who died a year ago, managed in 1964.

Between 1964 and the mid-70s, sisal went through a boom and bust.

Production declined between 1964 and early 1971 after a drop in prices. In 1963, sisal fetched Sh122 per 100 kilos, which dropped to Sh90 in 1967.

“Sisal cutting is likely to be reduced sharply since present prices are uneconomic for a number of plantations,” reads the 1968 Economic Survey. “Tea prices were steady, but sisal fell another K£8 per ton to reach a level at which many estates could not cover operating expenses and certainly not finance re-planting.”

The survey notes there were 50 sisal estates in 1950 when the prices of the crop were high, and 28 in 1969 after prices tumbled.

However, a slow recovery started in the early 70s as rising global oil prices increased the cost of synthetic substitutes.

But the new rally in sisal prices brought Bid’s family more problems.

“Even though we agreed to run the Mecca factory and plantation, the Government did not give us a lease. They were not complying, so we shut down in 1974 and sued them,” he told Business Beat last week.

It was another blow for the family, which had lost some of its coffee farms.

“We were one of the biggest coffee farmers in 1963 until a politically connected family grabbed some of our land.”

Last year, the courts awarded them compensation for the Mecca sisal estate deal, which Bid said came to about Sh7-8 million before interest.

Untapped value

He said his offer for Rea Vipingo is based on the value he sees in the business. 

“When you see there is a good bargain, what is wrong with making a bid?” he asked.

“I have not just made the Vipingo bid now. I have been buying shares, trying to get into the company because [my family knows] the company is undervalued and that is why we are among the top six shareholders.”

The question many investors in Rea Vipingo might be asking themselves is how a crop losing out to synthetic fibres is a bargain buy.

The Robinow brothers insist they will still stick to sisal growing. However, if they take the company private, they will be at liberty to try out other options. 

Centum’s options with what it will do with the land are not clear. Will they go big on real estate, or will they go into agribusiness?

For Bid, the focus seems to be on sisal, though he may also be looking into agribusiness.

“There are two areas demand for sisal is coming from. One is coffee; coffee is always exported in sisal bags. Second, there is a general trend worldwide where people want to use natural fibres rather than synthetics. A premium is paid for natural fibre.”

Bid’s family has stayed in agriculture, farming 1,400 acres mainly in central Kenya, and also owns an insurance firm and stock agency.

“You know how the western world works; they pay a premium. We are in citrus and mangoes, and they pay a premium for ecofarming. They are paying us 40 per cent extra if we do not use any fertilisers. People want to buy anything that is natural without using plastics, pesticides and all that,” he said.

If the West is paying a premium for sisal, then it seems the true value of Rea Vipingo has not been realized.

“There is a lot more potential in Rea Vipingo. I do not think they are utilizing the maximum sisal. They are not adding value to the sisal. The Robinow brothers seem to be selling all the sisal to their own company, Wigglesworth. The value added is probably done by Wigglesworth. I do not understand why Rea Vipingo’s marketing [of sisal] is done by one company,” Bid said.

He went on to say the country is losing billions of shillings by exporting raw material.

“What is the price of raw sisal fibre and the price of the end product? Who is taking the money in between? It is certainly not coming back into the country.”

Sisal production has declined over the years.

In 1983, there were 49,700 tonnes delivered to the Sisal Marketing Board compared to 27,600 tonnes in 2011.

Meanwhile, the price of sisal shot up from Sh6,672 per 100 kilos in 2010 to Sh9,119 in 2011.

The game plan

Bid’s offer for Rea Vipingo needs to get the acceptance of more than 25 per cent of the 60 million issued shares of the firm. This will do two things.

First, Bid will be in a position to stop the Robinow brothers, who need to acquire a minimum of 75 per cent of Rea Vipingo shares. The brothers control about 57 per cent of the sisal producer.

Secondly, if he buys the minimum 25 per cent, he will earn a seat on the board and could force the Robinow brothers to extract maximum value from the sisal.

The downside to this is that, with two dominant parties on the board, there might be a lot of friction, taking the company on a downward spiral.

Bid’s offer values Rea Vipingo at Sh3.3 billion, higher than Centum’s, which values the sisal producer at Sh3 billion. The Robinow brothers’ offer values the company at Sh2.4 billion. While Centum disclosed last week that it has a war chest of Sh5.8 billion to fund the acquisition, it is unclear how Bid will pay for the shares.

“We will be able to raise the money. We have our own resources,” he said, without giving details.

“I’m a businessman, when I make my offer, I would have done my thing [analysis]. I do not need to come and explain to you where and how I get the money.” 

At some point during the interview, he got quite defensive when asked about his wealth and intentions to buy into Rea Vipingo through Kenyalogy.com.

“Do not come to ask me why I bought using this company or that company,” he said. “Why have you come to see me? I am a businessman; I have my own way of doing my things. We have the expertise; we have been in the sisal business.”

But then he adopted a more philosophical tone.

“Are you saying I have to be a reporter or a newsman to buy shares in Standard Group? I am an investor; if I see an opportunity, I will buy. I might even buy Standard out if I find I have the expertise and it is a good investment for me. I do not have to be a newsman. As an investor, I am investing money into the business. I have shares in Standard, so are you saying I’m investing because I have to be a newsman. So you want to ask me questions about Standard? I might be taking over Standard as well.”

But if Bid is cagey about his holding companies, there is one thing that he opened up about during the interview.

A fortnight ago, a brief in the local dailies said the DPP plans to challenge the sentence he got for causing the death of 19-year-old Chepng’etich through dangerous driving.

“I don’t know about the reopening of the case until I’m served the papers. What I read in the press is that the DPP wants to review at the case,” Bid said.

By the time of going to press, he had not been served.

Bid was fined Sh100,000 for causing the death of Ms Chepng’etich. An additional fine of Sh5,000 was issued for injuring two other pedestrians, Galgalo Waqo and Rita Kendi.

A report in a local daily claimed the DPP was reopening the case on the request of Chepng’etich’s family, who thought the fines lenient.

“Is that for me to decide or for the court to decide?” Bid asked on reports that the fine was a slap on the wrist.

“I’m asking you, in Kenya, how many pedestrians are killed every year? The maximum fine is Sh50,000; I was fined Sh100,000.”

The accident

The accident happened on a Sunday, when he was travelling back from his farm in central Kenya, Bid recalled.

“It was evening, 8 o’clock. It was drizzling. We have taken all the videos to show if you can see the zebra crossing. For my defence in the case, we did a lot of research to show the magistrate what had happened,” he said.

“Go and see the court file, this was 18 months ago and Thika Highway had just been opened. They had not put any signs or lights ... they had not put the footbridges and all that. The case was tried in court and we gave all our mitigating factors,”

Does he regret taking a life?

“I regret, yes. Taking somebody’s life, I have been feeling sorry about it but it has happened. I should be suing the Government. How do you have a zebra crossing on a superhighway?”

Is it true he declined to carry Chepng’etich and the two other pedestrians? And that he sped off after knocking them down? 

“These are all lies. What is this question of me running away? That is all propaganda. Go see the statements in the police files. It will show you their statements ... who took them to the hospital?” he asked.

“Somebody is just saying. That is why we are suing for that [newspaper] story. We are telling them to either rectify or issue an apology.

“I asked them why they did not bother to call me or bother to check the police file. Every statement that local media house printed is a lie. It is contradictory to the police report.”