CMC may drive out of business.Nov 3rd, 2011 | By MrJob N. Okemwa | Category: Media Release
The future of one of Kenya’s largest motor dealers will be known this week. It will usher in phase two of a vicious boardroom war at CMC, where two camps are fighting for control of the Sh7.8 billion car firm
It will mainly be dependent on how the High Court rules on an application seeking to bar the Capital Markets Authority (CMA) from interfering with an extraordinary general meeting scheduled for November 21 at the Bomas of Kenya, Nairobi.
If it okays the meeting, that will be a big boost to the group led by Mr Peter Muthoka, the single largest shareholder of the firm (about 24.7 per cent) and until a month ago the largest service provider to CMC through Andy Forwarders, who are trying to make a return to the company after losing control to the group led by Mr William Lay, the current chief executive.
By calling for the extraordinary AGM, whose sole purpose is to oust four of the current directors, Mr Muthoka seems to have done his arithmetic well to know that he has the numbers to cause a coup at Bomas.
And should the court rule that CMA has a right to exercise its regulatory role, which would include cancelling the November 21 meeting and thus giving the current management more time to complete investigations on the company’s past transactions, the process will witness a long drawn-out battle for control.
CMA has indicated that it prefers to retain the status quo to allow investigations to be complete.
Mr Muthoka is said to have been making at least Sh500 million annually from CMC by offering shipment and other logistic services through Andy Forwarders. The new management has since cancelled the contract.
Mr Lay is the face of the new group, led by chairman Joe Kibe and Mr Paul Wanderi. The two have a combined stake of about 18.72 per cent, held individually and through their companies: Rift Valley Finance Services and Mobicom.
The group argues that Andy Forwarders has been overcharging for its services by between 10 and 100 per cent, bleeding the company by over Sh500 million annually.
“… following the termination of the Andy contract, the company is saving approximately Sh40 million a month in reduced logistics charges,” Mr Lay says in a letter sent to shareholders last week giving the reasons the management is opposed to the November 21 meeting.
The current scenario, where the next cause of action depends on court orders, is a setback to the Muthoka team, whose plan for a bloodless coup suffered a major setback on Friday when a ruling which would have secured the November 21 meeting was withdrawn.
After issuing a notice calling for the extraordinary AGM, which they said was for the sole purpose of having Mr Lay, Mr Wanderi, Mr Kibe and Mr Andrew Hamilton removed as directors, Mr Muthoka moved to court on Thursday to secure the date by ensuring that CMA was barred from interfering with the November 21 meeting.
Being a public-listed company, CMA has regulatory power over the conduct of the car dealer’s affairs. The powers include cancellation of the proposed meeting.
It is the latter that the Muthoka team wanted the High Court to forestall. He got the order but that was shortlived as on Friday the judge vacated the order as it turned out that he was a close relative of the lawyer representing Mr Muthoka.
Accused of conflict of interest and breach of natural justice, Justice David Majanja ordered that the application be heard afresh before another judge.