Kenyan-based regional motor dealer CMC Holdings has officially been delisted from the Nairobi Securities Exchange after the takeover by Al Futtaim Auto & Machinery Co. (Famco), a subsidiary of United Arab Emirates’ Al Futtaim Group. The removal of CMC’s securities from the Nairobi bourse was made public on Wednesday February 11, 2015.

The dealer’s stock has been suspended by the NSE since September 2011 following a boardroom battle that brought up claims of fraud and misappropriation of funds that had been taking place over a period of years. The company last traded at Sh13.50 ($0.15) four years ago before it was thrown into the capital market dungeon.

The Emirati Company had acquired 91.6 percent of CMC’s shares early last year, but it still wanted to mop up the rest of the free stock available in the market. It therefore increased its stake to 100 percent, signalling one of the biggest cross-border investment deals in Kenya in 2014. The acquisition cost Al Futtaim Sh7.5 billion ($82 million). An open offer was made on the Nairobi Stock Exchange at KSh13 a share.

CMC is a major player in the East African automobile industry. It distributes Ford, Mazda, Suzuki and Volkswagen vehicles among other brands, operating through wholly owned subsidiaries.

Other listed firms have been delisting from the Nairobi bourse in recent years. The NSE delisted the shares of Unilever Tea Kenya Ltd in 2009 after its main shareholder, Brooke Bond, bought out minority shareholders. Telecommunications firm Access Kenya was also delisted in 2013 following its acquisition by South Africa’s Dimension Data.  UK-owned Rea Vipingo Plantations (RVP) may also be delisted, depending on the outcome of pending court cases over a takeover.

Delisting means permanent removal of a listed company’s securities from a stock exchange. One of the reasons a company may decide to delist is that the majority shareholders may want to increase their stake in the company, which happened in the case of CMC. When a company is merged or acquired by another firm, it may also be forced to delist. The management sometimes delist if regulations are becoming too arduous for the company. Firms seeking greater freedom in decision-making may leave a bourse to achieve this. Violation of regulations and/or failing to meet financial specifications set out by the stock exchange is another reason why a company may be delisted. According to investopedia.com, companies that are delisted are not necessarily bankrupt, and may continue trading over the counter.

David Owiro, Programme Officer at the Institute of Economic Affairs explained why firms might be delisting from the Nairobi Securities Exchange. “This movement in and out of the Nairobi bourse points to several factors. Either compliance costs are becoming too high for listed firms or the level of supervision by the regulator is too intrusive, making some uncomfortable,” Kenya’s Standard Digital quoted him as saying.

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