Centum of Kenya Jumps on Speculation of Land Swap to Real Estate

Centum Investment Co. gained for the first time in nine days as an increased takeover offer for a Kenyan agriculture company boosted speculation that land used to grow sisal fiber will be converted for real estate.

The stock advanced 3.5 percent to 37.50 shillings by the close in the capital, Nairobi, the most since Feb. 10. Trading volume matched the three-month daily average.

Centum, Kenya’s largest publicly traded investment group, raised its offer to buy REA Vipingo Plantations Ltd. to 75 shillings ($0.87) a share from 50 shillings yesterday. That makes it the highest bidder and counters a March 3 offer by London-based REA Trading, which already owns 57 percent of REA Vipingo, to pay 70 shillings a share for the rest of the company.

“The idea of the acquisition is for Centum to grow its real-estate portfolio from 30 percent to 50 percent,” Rufus Mwanyasi, head trader at Nairobi-based Canaan Capital Ltd., said by phone. If Centum wins, it will have bought REA Vipingo “for cheap,” considering the value of the land owned by the company, Mwanyasi said.

Centum didn’t give details on its plans for REA Vipingo in the statement yesterday. The company is “venturing into agribusiness and we consider the opportunity to acquire shareholding in an agricultural company as a valuable opportunity,” Corporate Affairs Director Fred Murimi said in an e-mailed response to questions on Jan. 29. He didn’t immediately reply to an e-mail today.

REA Vipingo Managing Director Neil Cuthbert was away from his office and didn’t immediately respond to e-mailed questions.

Land Sales

Kenya’s real-estate industry may see growth from an economy seen expanding 5.4 percent this year from 5 percent in 2013, according to the median estimate in a Bloomberg survey of 12 economists last month. Asking prices for homes rose 0.3 percent last year, while average rents rose 8.5 percent, according to HassConsult, a Nairobi-based real-estate company.

In November, Rea Vipingo said it expects the takeover to be concluded by April 30. The company has two sisal estates in Kenya and three in Tanzania, according to its website. REA Trading said this week it will keep producing sisal if it wins the takeover, while offering investors as much as 15 shillings from future land sales.

In the year ending Sept. 30, Centum’s investments in real estate were valued at 4 billion shillings, or 28 percent of its portfolio. The company’s strategy is “to convert bare land to high quality commercial urban environments,” according to its earnings presentation.

Better Price

“I don’t think Centum will continue with agriculture, they want to buy the whole thing for the land, it’s more of a real-estate play,” Davis Mika an analyst at Nairobi-based Contrarian Investing Kenya Ltd., said by phone. Some traders “think its offer price is better than for REA Trading and they will succeed,” he said.

Centum is currently developing land in Nairobi and on Lake Victoria in Uganda, according to the website of Athena Properties Ltd., Centum’s real-estate unit.

The shares have climbed 14 percent this year, compared with a 1 percent gain on the FTSE NSE Kenya 25 Index. Trading in REA Vipingo’s stock was halted in November.

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