Centum Investment recorded a Sh1.1 billion gain from the sale of its 26.4 per cent stake in Kenya Wine Agencies Limited (Kwal) to South African brewer Distell in March.
The transaction, alongside the sale of an eight per cent stake in microcredit firm Platcorp in which it gained Sh432 million, was one of the most profitable deals for the company in the year ended March.
“During the year, we successfully exited our 26.4 stake in Kwal, which was a legacy asset in our portfolio that was no longer aligned with our … strategy, realising a gain of Sh1.1 billion,” the company says in its latest annual report.
“We also partially exited our stake in Platcorp, realising a gain of Sh432 million.”
The profit on the Kwal transaction included some Sh500 million the investment firm had received from the alcohol manufacturer as payouts to shareholders over the years.
Centum had already booked major unrealised gains on the two investments, but received even higher payouts from the buyers, expanding the profits.
Its interest in Kwal was carried at Sh738 million, but the company sold it to Distell for Sh1.1 billion, having acquired the stake in 1977 for Sh12.2 million un-adjusted for inflation.
The Platcorp equity was valued at Sh761.1 million, but was sold for Sh813.4 million. Centum retained a 27.63 per cent ownership in the microcredit firm after the deal.
Centum’s report shows it is sitting on cumulative capital gains of Sh24.1 billion across its subsidiaries including Almasi Beverages and Two Rivers Development Limited, setting it up to realise significant profits in future divestitures.
“Notably, realised gains from our exits from Kwal and Platcorp (partial exit) were key drivers of our performance,” the company said.
The gains helped mitigate a drop in income, which saw the company’s net earnings decline 16 per cent to Sh8.3 billion in the year ended March.
The buyout of Centum raised Distell’s stake in Kwal to a controlling 52.43 per cent.
Distell had spent Sh834 million to acquire its initial 26 per cent in Kwal in 2014, with the multinational paying extra in the Centum deal seen as a reflection of the brewer’s growth.