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Monday, May 07, 2012

KenolKobil vs Kenya Airways - Management Ownership


KenolKobil issued a "Cautionary Statement" - http://kenolkobil.com/index.php/component/content/article/58/311

As I have said before, there is a world of difference between firms like KK & KQ.

KK - The CEO among senior managers have shares & options in KK that take the share price & firms' performance into account.

KQ - The CEO has ZERO shares/options & the entire Board of Directors [excluding KLM & GoK as corporate directors] have less than 25,000 shares.

Now to excerpts from KK's announcement:

"the key shareholders of the Company signed an Exclusive Agreement with Puma Energy for the sale of their majority shareholdings in KenolKobil...  and contemplates making a Take-Over offer to acquire all the shares in the Company..."

"The KenolKobil Board of Directors believes that this transaction... would be a very positive development for the KenolKobil Group... The contemplated transaction is in line with the already expressed wish of Management to drive the Group to new highs and the next level of business development..."

KK's shares traded at 12.55 - 12.70 on 7th May 2012. I expect the price to rise considerably as the key shareholders, BoD & Management [who care about all the Shareholders] have probably negotiated a price or deal that prices the shares at a price HIGHER than market price and closer, if not higher, than the Net Asset Value per Share.

Let's compare this to the BoD & Management of KQ who sold the Rights Issues shares at 14/- when the NAV was 50/- (2010-11 audited accounts). Of course, unlike the BoD/Management of KK, the folks at KQ are in it for the perks, free flights & huge allowances.

I had highlighted KenolKobil's Chairman & CEO (Jacob Segman) as someone with a vested interest in the firm he runs. This is unlike the Chairman, BoD & CEO of KQ who has ZERO shares thus had nothing to lose when the shares were sold in the Rights Issue at a 72% discount to NAV/Share.

Whereas it is not known what price the 'key shareholders' have agreed to sell their stake in KK at but it will most likely be at a significant premium to the price as of 7 May 2012.


And on a personal note, I am sure Not-The-Standard Investicon Skank is not advising KK...


*** Did you know Steve Jobs had a $1 salary from Apple? He was paid in Options.

8 comments:

Anonymous said...

KK

KK is run by entrepreneurs who see the company as an employer and a business they own. Wanjiku's interest and those of management and staff are aligned. Management is rewarded with some money and shares for making profits and increasing the value/ share price performance of the company. The board is also clear on their mission - to create as much wealth for Hon. Nick B!

KQ
KQ is run by management with a civil servant mentality obsessed with self aggrandizement. It's about their pockets, jobs, careers and progression in life. The go to work to extract value from the business. Management believes they are doing KQ a favor and their perks are a small compensation for their gargantuan efforts in running their airline, and enhancing Kenya's image and Nairobi as a premier hub in Africa. The board are corporate statesmen with sufficient wealth and experience to guide management and don't have to listen to wanjiku's rants - she can sell her shares if she can't fathom what the board's ability and thought process in running the premier Kenyan airline - Case of extreme misalignment between Wanjiku and the rest of them.

coldtusker said...

Anon 2:57:00

I agree with you on KK. The Board's (& Mgmt's) job was to maximize value for nick b [& the other s/holders have benefitted) & family.

If you look at the Financial Statements, there is a hefty ESOP for the Management + the CEO has a sweet package with Options amounting to 4% of KK from 2010-14 with options allocated prior to 2010 as well. He definitely has an incentive to maximize his stake!

So the Management, BoD & CEO's [+ nick B's] stakes have benefitted the minority s/holders in performance & possibly realization of 'value' after the (in progress) Takeover by Puma.

coldtusker said...

Anon 2:57:00

On KQ: I sort of detected a sarcasm & I like your "KQ is run by management with a civil servant mentality obsessed with self aggrandizement. It's about their pockets, jobs, careers and progression in life".

Nothing about s/holders there since they have an insignificant stake in KQ.

"Case of extreme misalignment between Wanjiku and the rest of them." - Yet the board members want their perks. Free flights for them, the spouses & families. Not to mention the allowances, etc

skayjnr said...

How about independent directors? They have shares and retire on rotation.That's in the case of staggered boards. I agree directors have to have shares(& I think it is for this reason that the board rejected the lead transaction adviser's issue price and set their own) but not the C.E.O The value will remain the same since shares increase but you also take up your shares. Cumulatively it remains the same.The percentage remains the same. Only those who did not take up their rights will loose value. Bonus compared to share options. Naikuni weighed(maybe) and took bonus.

skayjnr said...

How about independent directors? They have shares and retire on rotation.That's in the case of staggered boards. I agree directors have to have shares(& I think it is for this reason that the board rejected the lead transaction adviser's issue price and set their own) but not the C.E.O The value will remain the same since shares increase but you also take up your shares. Cumulatively it remains the same.The percentage remains the same. Only those who did not take up their rights will loose value. Bonus compared to share options. Naikuni weighed(maybe) and took bonus.

Kauka said...

Skayjnr!

Mate, I doubt you did your homework before you commented - not to worry typical kenyan problem. What I want you to do is (and I am being very deliberately patronizing) go and check the list of directors with shares and you will find none - ignore Treasury PS - those are not his they belong to us/GoK. Then visit your broker/investment bank and find out how they value companies.

After that you will understand that the price of secondary issue is not thumbs suck or a result of back of the envelope calculations. You will also learn that when a company issues rights it is saying bring more money for each share alloted to you @14/share. This should quash this ''VALUE stays the SAME'' mirage you seem to be seeing. Simply put, adding money to pay for new shares at a price below the price majority of you bought the original shares at - repeat after me, is what is called "LOSS OF VALUE''. Options as compensation are dictated by the board of directors as part of the pay package and any reasonable CEO who backs him/herself will take the same.

Anonymous said...

If Coldtusker Spent this much effort in her academics, she would have been the CEO of KQ.

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