Express Kenya CEO Hector Diniz edges closer to owning 71 per cent of its shares

Hector Diniz is set to control 70.9 per cent of listed firm Express Kenya, where he is CEO, if a plan to convert a Sh60 million debt owed to his companies into equity is approved by regulator Capital Markets Authority (CMA).

Management of the logistics firm said the transaction is meant to boost its working capital position, which has dropped to more than negative Sh50 million so far.

The transaction, which is already proving controversial among some stakeholders, will see Mr Diniz issued with an additional 12 million shares at a premium Sh5 each compared to the current trading price of Sh4.30 per unit at the Nairobi Securities Exchange.

“The company wishes to capitalise Sh60 million owed by the company to related companies Airport Trading Centre Limited (Sh42 million) and Diniz Holdings (Sh18 million) being part of the loan balance standing in the account as at December 31, 2014,” said the company in a public statement.

Mr Diniz confirmed he owns both companies. Airport Trading Centre is engaged in real estate and is landlord to Express Kenya.

Diniz holdings is the parent company of several businesses owned by Mr Diniz which have interest in real estate, aviation and other sectors.

Paul Wanderi, the second largest shareholder in the listed logistics company with a 5.4 per cent stake, has however questioned the origin of the loans and their benefits to Express Kenya.

His holding will be diluted to four per cent after the conversion.

“CMA should check whether the loans were issued at arms-length and did they benefit the company because they have to protect the retail investors,” said Mr Wanderi. “I would be surprised if CMA allows companies to run down listed companies and then convert debt to equity,” he added.

Mr Diniz, who is also the chief executive of Express Kenya, said shareholders approved the plan last Friday during the company’s annual general meeting where it was presented as any other business.

The transaction will see Airport Trading and Diniz Holdings take a combined 25.3 per cent of Express Kenya. Ectoville, also owned by Mr Diniz, is the majority shareholder with a 60.4 per cent shareholding which will be diluted to 45.1 per cent after the conversion.

READ: Express Kenya to build 224 houses in Industrial Area

Mr Diniz also holds 178,700 shares, 0.5 per cent of the company, in his individual capacity. This means his total shareholding will be 70.9 per cent up from 60.9 per cent when the deal goes through.

Going by the company’s annual report for the period ended December, it’s borrowing from related parties stood at Sh14.1 million though.

The report indicates total borrowings at Sh114 million with Sh42 million being a long-term bank loan, Sh7 million a short term bank loan, Sh50 million in overdraft and the remaining as related parties.

Mr Diniz, however, said Sh14 million was only a short-term debt to related parties but there was an additional amount classified as long-term.

Express Kenya has posted mixed results in the last five years, dipping back to the red last year with a Sh77.3 million loss from a Sh229,000 profit in 2013.

To boost its performance, the company has turned to real estate with plans to build 224 apartments on its Likoni Road property.