Centum books Isuzu shares at $30 million (Kenya)

By Victor Juma | Business Daily, Kenya September 18, 2017

Centum Investment  has marked down its 17.8 per cent stake in Isuzu East Africa by Sh1.6 billion following a recent share sale at the auto dealer.

The mark down could be an indication that the Nairobi Securities Exchange-listed firm had valued the stake higher than the transaction price realised when Japanese automaker Isuzu bought out the Kenya operations of US vehicles producer General Motors.

The company carried its interest in Isuzu at Sh3 billion in the year ended March, down from Sh4.6 billion the year before as per its latest annual report.

Centum said it previously relied on estimating what similar auto dealers would sell for but changed to base its valuation on the price paid by Isuzu Motors to acquire General Motors’ 57.7 per cent stake in the company in February.

The transaction, in which the Tokyo-based multinational paid Sh9.8 billion to GM, valued the entire company at Sh17 billion or 35.1 per cent lower than Centum’s previous estimate of Sh26.2 billion.

The investment firm uses various valuation methods including recent transactions at its subsidiaries or associates and by inferring value from comparable companies.

The Isuzu/GM deal is likely to indicate a more reliable valuation given its scale and the fact that the parties involved are global automakers, a move that saw Centum ride on the transaction to re-price its minority stake.

Unlike their publicly traded counterparts, private companies are hard to value especially if they are in industries which go for years without mergers or acquisitions.

The exit of GM at Isuzu East Africa revealed the auto dealer’s relatively higher value compared to its rivals.

At Sh17 billion, it is arguably the most valuable dealership in the country with the largest market share of 35 per cent in the new vehicles segment in 2016.

CMC Holdings was fully acquired by Dubai-based Al Futtaim in 2014 for Sh7.5 billion. DT Dobie and CICA Motors were also fully acquired by Japan’s Toyota Tsusho Corporation in 2013 for undisclosed sums as part a global deal involving their former parent company CFAO Group.

Isuzu bought out GM to reduce its reliance on the American firm to sell its brands outside Japan.

Isuzu pick-ups, trucks and buses account for about 95 per cent of the Nairobi-based dealer’s sales — making the acquisition critical.

GM also responded to the takeover deal by taking away its Chevrolet car franchise, leaving the company to deal exclusively in Isuzu brands.

Besides Centum, other shareholders of the auto dealer are ICDC with a 20 per cent stake and Itochu Corporation (4.5 per cent).

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