Sale of Limuru Tea sheds Light on Undervalued Businesses

The conflict between minority shareholders of listed Limuru Tea and Unilever over the sale of a majority interest to US private equity fund CVC Capital Partners has once again raised questions about how much plantation companies are worth in comparison to the value of the land they own. The six listed agricultural companies control thousands of hectares of prime land, together with companies in the industrial and construction industries, whose value is occasionally exaggerated in financial reports. The six companies—Eaagads, Kakuzi, Kapchorua Tea, Williamson Tea, Sasini, and Limuru Tea—put a value on their freehold land in their annual reports; some of them mention the real worth with recent appraisals.

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They also own substantial parcels of leasehold property, which are not valued following accounting standards. They also own substantial parcels of leasehold property that, according to realtor HassConsult’s land index 2021, are not valued at the current land prices in the neighborhood. In court filings submitted last month, minority owners of Limuru Tea, backed by businessman Joe Wanjui and actress Wainaina Kenyanjui, said that the company’s land holdings in Limuru had been undervalued.

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As part of the investigation into the sale of Unilever’s shareholding in Limuru, the Capital Markets Authority (CMA) has asked Limuru Tea to disclose all of its land assessment studies and verified copies of land title certificates. While stockholders estimate the value of the land at Sh16.2 billion, Limuru asserts that it is only Sh1.42 billion. Williamson Tea estimated the combined value of its land and buildings to be Sh1.28 billion as of March 2021, while Eaagads reported that following a revaluation in December 2020, the 44 hectares of land it owns in Thika are now valued at Sh815.45 million, indicating a market value of about Sh18.5 million per hectare. The company has a mixture of freehold and leasehold land totaling roughly 4,299 hectares in Makuyu, Kenya.

The company has a mixture of freehold and leasehold land totaling roughly 4,299 hectares in Makuyu, Murang’a, and Nandi counties. In its 2021 annual report, Kakuzi, the market segment’s largest company by market capitalization (Sh7.94 billion), said that the combined net book value of its freehold land, buildings, and dams was Sh1.21 billion at the end of the previous year.

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The companies’ shares aren’t readily available to individual investors because they have among of the smallest numbers of issued shares at the stock exchange. Due to the lack of adequate quantities to support demand, the lack of sufficient liquidity—for example, Limuru Tea has only 2.4 million issued shares and 212 shareholders—has made it difficult to determine prices. When investors watched the high-stakes struggle between Centum and Rea Trading for control of Rea Vipingo, which was delisted in 2015, their eyes were first opened to the potential worth of the land holdings. British brothers Richard and Jeremy Robinow wanted to purchase the remaining shares in the Sisal company at Sh40 per share in November 2013, even though they already own a combined 57 percent of the company through Rea Trading and Rea Holdings Plc.

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