South Africa-based insurance group Metropolitan and Momentum International (MMI Holdings) is set to spend over Sh1 billion on acquisition of additional 25 per cent stakes each in its Kenyan subsidiaries Cannon Assurance and Metropolitan Life Kenya.
MMI Holdings first bought into Cannon last year, taking a 66.3 per cent stake at a cost of Sh2.5 billion. Its equity in Metropolitan also stands at the same level, leaving with it minority interests of 33.7 per cent each in the two subsidiaries.
MMI says it is ready to further boost its shareholding in the units, setting aside the requisite sums that it will use to exercise its right of first refusal should the non-controlling interests opt to sell their stake from next year.
“Non-controlling interests of 25 per cent of Metropolitan Life Kenya and Cannon have the option to sell their shares from October 3, 2016 at a price linked to embedded value,” MMI said in a trading update.
“In terms of international financial reporting standards (IFRS), the group has recognised a financial liability, being the present value of the estimated purchase price, for exercising this option.”
READ: SA firm gets green light for Sh2.4bn Cannon Assurance deal
MMI says it has already consolidated 96 per cent of the subsidiaries’ earnings and de-recognised the non-controlling interest based on the fact that it has already provided for their buyout.
Cannon and Metropolitan –which are in the process of merging their operations – did not respond to our queries by the time of going to press.
In the initial acquisition of Cannon, MMI offered its shareholders an undisclosed minority stake in Metropolitan as part of the cash-and-stock deal.
The additional share purchases by the multinational are expected to see the exit of most of those shareholders.
MMI is betting on the acquisitions to grow its presence in the East African market where the low uptake of insurance – at less than five per cent – is seen providing future growth opportunities.
Cannon and Metropolitan currently operate only in Kenya but the multinational plans to use the subsidiaries to expand in the region in the medium term.