East African insurance giant UAP Insurance Group has raised Sh4.7 billion ($54.8 million) from the sale of shares to three private equity funds, Aureos Africa Fund, AfricInvest Fund and Swedfund International AB, in a bid to finance expansion as it eye Nairobi Securities Exchange (NSE) listing in two years.
The deal gaurantees the three private equity funds equivalent shares of a 40 percent stake, in a deal which values the regional insurer at Sh11.75 billion ($138 million), and is set to help UAP spread its reach across Africa, reinforce its grasp of the region’s red hot property market and diversify its portfolio away from the equities market.
Reports also indicate that the deal will reduce the insurers’ appetite to list at Nairobi bourse—where it had planned an IPO last March—and has now applied to the Capital Markets Authority (CMA) to raise Sh750 million ($8.8 million) through a public offer slated for August.
According to Dominic Kiarie, the deputy managing director of UAP Insurance, shares were created to “accommodate new shareholders”.
“Will use the cash to strength our Pan African expansion and ensure a balanced and optimum investment portfolio with a focus on real estate. “We plan to list at the NSE in 12 to 24 months since we now keen on the public offer,” said Mr Kiarie.
Some of UAP’s major shareholders are businessman and Chairman of the company Dr Joe Wanjui, who had a 35.84 per cent stake in December 2010, Centum Investment (24.2 per cent), Kenyan Billionaire Chris Kirubi (16.88 per cent) and its group managing director James Muguiyi (10.53 per cent).
UAP intends to enter into three new markets—Rwanda, Tanzania, and the Democratic Republic of Congo (DRC) before the end of the year. This will increase its presence in East Africa following its entry into South Sudan in 2006 and Uganda in 2004.
The foray into DRC, however, depends on whether or not the pending change in legislation is realised, allowing for registration of private insurance companies, Businessdailyafrica reports.
In Rwanda, it is keen on starting operations from scratch while in Tanzania it is going for an acquisition. Mr Kiarie said negotiations for the buyout are at an advanced stage, although he refused to give further details.
At the moment, UAP’s investment options are limited to real estate in a region whose financial markets are still under-developed.
In pursuance of its diversification strategy, the insurer is set to launch an asset management subsidiary by end of June, under which it will develop a real estate investment trust (Reit) to be used in developing a land bank in strategic areas.
Under the property fund, investors would be able to sell their shares to third parties, who will earn a return from disposal of houses, office blocks, and rental income, as an exit strategy.
The surge in prices and rents has seen property emerge as a prime investment vehicle in step with bonds and equities asset classes. Prior this time, the sector battled with nearly three decades of under investment in the mid-tier housing segment.
UAP currently own the Telkom Plaza, Union House, and Equity Centre.
One of its three PE Funds, AfricInvest opened shop in Kenya IN October 2009 and is eyeing stakes in midsized companies in telecoms, agribusiness and hotel industry. It investments are focused in West and North Africa, although it bought a 22 percent stake in an East African Family Bank.
Sweden-based Swedfund International AB investment preference is in the emerging markets of Africa, Asia and Latin America while Aureos Africa Fund has regional office in Nairobi.
In recent times, PE funds have intensified activities in Kenya’s insurance market after last year’s purchase of a 25 percent stake by Leapfrog and a controlling stake in AAR Holdings by Dutch Fund—Investment Fund for Health Africa.
UAP’s net profit for 2011 stood at Sh 919 million ($11 million) compared to Sh678 million ($8 million) in 2010.