British firm Ekaterra Holdco UK Limited will get an extra stake in Lipton Teas and Infusions Kenya if shareholders approve the conversion of its Sh18.59 billion loan in the tea firm into equity.
The current ownership structure of the subsidiary was not disclosed.
Lipton Teas has called for a virtual special general meeting (SGM) next week Tuesday July 21 for shareholders to vote on the proposal that will see the firm create new 17.47 million shares and allocate them to Ekaterra.
The debt-to-equity conversion deal will increase the share capital of the company to Sh674.73 million of Sh10 each and cut the outstanding debt in Lipton’s books.
Lipton had tapped the Sh18.59 billion as a shareholder loan from Ekaterra to fund working capital requirements.
The firm says the loan was subject to repayment within certain agreed timelines but its current financial position cannot allow it to service the loan comfortably.
“While the business has recorded improved efficiencies, expansion and resources, it has not achieved the financial capabilities and flexibilities required to repay these loans without significantly affecting its operations,” said Lipton chairperson Gerridina Ten-Den in an SGM notice.
“Once the shares are issued to Ekaterra Holdco UK Limited, the debts owing to them from the company (Lipton) will be considered paid.”
Ekaterra, through the Lipton brand is among leading players in the global tea industry with its business cutting across the value chain, from farm, processing and supply, manufacturing, packaging, to the retail market.
In Kenya, Lipton’s estates include 11 plantations and eight factories in Limuru, Kericho and Bomet counties, assets that had earlier been owned by Unilever, before being bought by CVC Capital Partners.
Sri Lanka’s Browns Investments announced early May this year that it had reached an agreement to buy Lipton tea companies in Kenya, Tanzania and Rwanda from their UK and Netherlands based parents.
Browns said it entered into a sales and purchase agreement with Ekaterra Holdco UK Limited, and Netherlands based Ekaterra Group Holdings BV and Ekaterra Group Holdings 2 BV to buy the firms.
Filings to the Colombo Stock Exchange showed the deal would give Browns control of 100 percent of Lipton Teas and Infusions Rwanda Limited and 100 percent of Lipton Teas and Infusions Tanzania Limited.
Browns was also going to buy 98.56 percent of Lipton Teas and Infusions Kenya which has an estate area of 14,100 hectares and an annual production volume of 33,000 kilogrammes in the country.
Lipton Teas and Infusions Kenya owns a 52 percent stake in Limuru Tea which is listed on the Nairobi Securities Exchange.
Lipton Teas had made a move to acquire the remaining shares in Limuru Tea but withdrew the proposed transaction after the Capital Markets Authority (CMA) blocked it.
