An investment company associated with former president Daniel arap Moi has bought an additional stake in InterContinental Hotel Nairobi, gaining majority control of the 5-star establishment.
The Sovereign Group, a fund associated with the Moi family and allies, acquired a 33.83 per cent stake that belonged to global chain InterContinental Hotels Corporation, marking the UK-based firm’s exit from the Nairobi facility after 48 years.
The ownership changes have been made public in a Kenya Gazette notice indicating that Sovereign Group is in the process of acquiring 5,874,391 shares in Kenya Hotel Properties Limited, the holding company the owns InterContinental Hotel Nairobi, for an undisclosed amount.
The Competition Authority of Kenya (CAK), through the gazette notice, has approved the transaction, clearing the way for transformation of the prestigious hotel into a 100 per cent locally-owned company.
The Business Daily was not able to confirm the value of the transaction but given the stake involved and stature of the premises, it should be in hundreds of millions of shillings.
Solomon Kitungu, the Privatisation Commission’s chief executive, said the government’s stake in the firm was still intact and had not been sold.
“The government has not disposed of its stake yet. That is the InterContinental Hotels Group which moved its shares,” he said in reference to the gazette notice.
The deal gives the former president and his allies 53.13 per cent shareholding in Kenya Hotel Properties Limited, InterContinental Hotel Nairobi’s holding company.
The Kenya government, through the Tourism Finance Corporation (TFC), owns a 33.83 per cent stake in the holding company that it is still looking to offload. The Development Bank of Kenya with a 12.99 per cent stake is the other significant shareholder in Kenya Hotel Properties.
Joshua Kulei (Mr Moi’s former private secretary), Rodger Kacou and Ahmed Jibril own a combined stake of less than one per cent in the firm.
The InterContinental Hotels Corporation has been running and managing the 389-room InterContinental Hotel Nairobi under a 99-year lease since April 1967.
Talk of an ownership shift at the hotel began in August 2011 when the then President Mwai Kibaki’s cabinet gave the green light for the sale of TFC’s stake with pre-emptive rights to existing shareholders.
TFC, formerly known as Kenya Tourist Development Corporation, was offloading the shares in a privatisation exercise meant to transfer government-owned businesses, including underperforming sugar mills, to the private sector.
Parliament in January 2013 gave the corporation the go-ahead to sell its 40.57 per cent shareholding in Hilton Hotel and the 39.1 per cent it owns in Mountain Lodge Limited. Mountain Lodge in Mount Kenya National Park is managed by TPS Serena, which owns a 29.91 per cent in the facility.
READ: Treasury gets nod to sell stake in Hilton, InterCon hotels
The State-sponsored mega sale is what led to the recent disposal of the government’s 26 per cent stake in Kenya Wine Agencies Limited (KWAL) to South Africa’s Distell for Sh860 million.
Sale of the three luxury hotels was meant to help KTDC mobilise resources it needed to rehabilitate and modernise its existing facilities.
It was largely expected that InterContinental Hotels Corporation, which is listed in both the UK and US, would buy the government’s portion and take full control of the business.
The international hotel chain has exhibited interest in deepening its local hospitality footprint with the opening of Crowne Plaza (one of its global brands) in Nairobi’s Upper Hill area in March 2010.
However, the sale of InterContinental, Hilton and Mountain Lodge hit a snag early this year after partner shareholders placed bids that were below the set reserve price, forcing the Privatisation Commission to go back to the drawing board.
“Sale was by pre-emptive rights. Offers made (were) below the commission’s valuationrice,” said the agency, while declining to reveal the reserve price for each facility and how much it expected to raise from the sale.
The InterContinental Corporation has now opted out of the Nairobi hotel altogether, handing its stewardship to the Sovereign Group after nearly five decades in the business.
The gazette notice says that Sovereign Group’s income in 2014 was Sh597.4 million while that of InterContinental Hotels Corporation was Sh91 million.
The hotels’ cumulative income of Sh688.4 million is below the Sh1 billion threshold that would require the transaction to be fully interrogated by the competition regulator.
“The CAK excludes the proposed acquisition of 5,874,391 shares in Kenya Hotels Properties Limited by Sovereign Trust Limited,” Wang’ombe Kariuki, the authority’s director-general, said in a supplementary gazette notice.
“The merger (shareholding transfer) shall not affect competition negatively,” said Mr Wang’ombe, essentially approving the transaction.
The InterContinental Corporation is a subsidiary of the InterContinental Hotels Group (IHG) Plc. The group operates over 4,800 five-star establishments in more than 60 countries in North America, Africa, Asia-Pacific, Australia, Oceania, Central America, the Caribbean, Europe, the Middle East, and South America.
The list of IHG’s global brands includes Holiday Inn, Kimpton, Even, Hotel Indigo, Staybridge Suites, Candlewood Suites, Hualuxe Crowne Plaza, and InterContinental Hotels.
The majority of these businesses operate as franchisees, a model the Kenyan hotel is expected to adopt if it decided to keep the ‘InterContinental’ name.
SOURCE: BUSINESS DAILY