Unga buyout company Seaboard faces US probe


Unga products. PHOTO | FILE
Unga products. PHOTO | FILE 

American authorities are investigating Seaboard Corporation, the multinational company that is planning to buy out Unga Group’s #ticker:UNGA minority shareholders, for alleged financial misconduct in multiple African countries including Kenya, reports indicate.

Prosecutors in the United States are interrogating Seaboard’s Pan African operations for evidence of multiple crimes, including money laundering, bribery, and doing business with entities blacklisted by the American government.

“During 2017, Seaboard received grand jury subpoenas requesting documents and information related to money transfers and bank accounts in the Democratic Republic of Congo (“DRC”) and other African countries and requests to interview certain Seaboard employees and to obtain testimony before a grand jury,” the conglomerate said in a regulatory filing dated November 1, 2017.

Seaboard said it has retained outside counsel and is co-operating with the investigation.

The company added that it could not determine, as of that date, the probability of a favourable or unfavourable outcome or estimate any potential loss resulting from the government’s inquiry.

Under the United States’ Foreign Corrupt Practices Act (FCPA), individuals face jail terms while companies pay fines if found guilty.

Seaboard says the current investigations follow earlier ones between 2014 and 2016 that focused on money laundering.

Grand juries, like the one investigating Seaboard, are drawn from members of the public and are relied on by prosecutors to determine whether probable cause exists to support criminal charges.

As part of their investigation, prosecutors can compel corporations to hand over records relating to the case.

They can also question witnesses who are not allowed to have lawyers in attendance.

Seaboard has sprawling operations in Africa where it has subsidiaries and affiliates dealing in production and trading of human and animal feed.

The multinational has an interest in more than 15 companies across the continent, including Unga (Kenya), Flour Mills of Ghana Limited (Ghana), Paramount Mills (South Africa) and Life Flour Mill Limited (Nigeria).

Net sales from these territories totalled $1.5 billion (Sh158 billion) in the year ended December 2016, according to Seaboard’s disclosures.

Besides owning a 2.92 per cent stake in Unga and a separate 35 per cent equity in the Nairobi Securities Exchange-listed firm’s operating units, Seaboard is a major supplier of the miller.

The US company provided Unga with raw materials, management services, equipment, spares and trade finance facilities worth Sh3.8 billion in the year ended June 2017.

Unga said Sh852 million due to the conglomerate was yet to be paid at the end of the review period. Seaboard was also among several commodities traders that were picked by the Kenyan government last year to supply maize amid major shortages of the staple food.

Investigations into the multinational’s African operations come at a time when it plans to take Unga private, working in concert with the Philip Ndegwa family, which will retain its 50.93 per cent stake in the miller through its investment vehicle Victus Limited.

Seaboard’s offer to acquire an additional 46.1 per cent stake in Unga at Sh40 per share has been criticised by minority shareholders who have argued that it undervalues the miller, which has a book value of Sh49.2 per share.

Seaboard values the extra stake it is targeting at Sh1.4 billion, denying the minority shareholders Sh321.4 million if they were to get the full price of Sh1.7 billion.

Unga’s share price on the NSE has since rallied to close at Sh43 yesterday, a development that is expected to make it harder for the multinational to justify its bid.

Shareholders are waiting for an opinion from an independent adviser on the adequacy of Seaboard’s bid.

The consultant is expected to look into all aspects of the company including its valuation before making its recommendation, the Capital Markets Authority (CMA) said.

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