Diversified trading firm Car & General (C&G) is seeking to wholly re-acquire diesel engine manufacturer Cummins C&G Limited (Cummins CG) in a deal subject to regulatory approval.
The Nairobi Securities Exchange-listed firm has entered into a share purchase agreement with CMI Africa Holdings BV (Cummins BV) to buy the remaining 50 percent stake to give it full ownership of the distributorship business once again.
C&G sold its stake in Cummins CG to the franchise US owner Cummins Inc in 2017, fetching Sh412 million, to form the joint venture. At the time, C&G had decried increased competition from rival equipment manufacturers and dealers.
The listed firm, whose business spans poultry farming and real estate, was appointed Cummins’ diesel engines, turbochargers, alternators and generators distributor in 2006.
The latest proposal is, therefore C&G’s game plan to regain its status as the sole owner of the engines and generators distributorship.
In a cautionary announcement to members of the public, C&G noted that although the structure of the business will be bound to change, its commitment to clients in the region would remain unaltered.
“C&G entered into the joint venture with Cummins BV in 2017, and the joint venture has been successful. To continue to grow and improve customer support, the strategic decision being announced was made jointly by both partners,” said C&G in a statement.
The parties anticipate the transaction approval to be effected in three months, saying Cummins CG will subsequently continue to operate as a wholly owned subsidiary of C&G as well as an authorised Cummins distributor in the Eastern African region.
The firm’s share price closed at Sh36 on Friday, a 1.6 percent drop from its previous closing price of Sh36.60.
The company, which has been on an expansion drive in recent months, opened a helmet manufacturing plant last year as part of its diversification plan that has seen it venture into real estate and consumer credit, in addition to motorcycles and tuk-tuks, among others.
During the year ending September 2022, the company added 711 jobs across its operations, becoming one of the few entities to significantly scale up hiring in an economy where most firms have been cutting jobs in response to sluggish sales growth.
However, net profit for the full year ended September 2022 dropped 23 percent to Sh679.46 million due to higher debt service costs.