Business Daily<\/a> (Nairobi)<\/p>\nJohn Gachiri<\/p>\n
28 December 2011<\/p>\n
\nThe Nairobi Securities Exchange (NSE) has halted trading of East African Portland Cement Company’s share until the cement maker responds to a query over its state of affairs.<\/p>\n
The NSE said that it has written to company asking for official information over reports on suspension of the board and the firm’s chief executive Kephar Tande, which happened late last week following an order from the government, its largest shareholder.<\/p>\n
“We have halted the trading until we get official communication from their office,” said NSE head of marketing and product development, Donald Ouma.<\/p>\n
A halt in trading is a short-term regulatory action that could last for a few hours to a day. By the close of the market yesterday the stock was still not trading. A suspension is longer and indefinite.<\/p>\n
The government owns 48.3 per cent of the company’s share through a 25.3 per cent direct stake and an indirect 23 per cent shareholding through state workers’ pension fund, National Social Security Fund (NSSF). French cement conglomerate, Lafarge, owns 41.7 per cent, the NSSF staff pension fund controls four per cent and the public holds the remaining six per cent.<\/p>\n
Mr Ouma said reports of the board and chief executive suspension were enough to warrant a temporary halt in the cement maker’s share trading.<\/p>\n
“When a shareholder sees that a whole board has been suspended that is material information,” said Mr Ouma. He said that in the absence of an official communication from the company, halting trading of the share was necessary to prevent investor decisions being made based on unclear or inaccurate information.<\/p>\n
Robert Munuku, an analyst at Drummond Investment Bank, said that the move was expected since it was the recommended remedy to prevent the possibility of a share price slump while buying the firm’s management time to iron out issues.”We saw it with CMC where shares were suspended to protect investors,” said Mr Munuku.<\/p>\n
In September, the industry regulator Capital Markets Authority (CMA) suspended trading of CMC’s shares after allegations of fraud by board members emerged. “The seven-day suspension period is expected to ensure that investor confidence in the capital markets is sustained, give the CMC Holdings’ directors an opportunity to resolve the outstanding issues, and facilitate investigations by CMA of allegations relating to CMC Holdings’ conduct of its affairs,” said the CMA chief executive, Mrs Stella Kilonzo, at the time.<\/p>\n
The suspension was extended by another 90 days during which the CMA is expected to compile the forensic report on CMC.<\/p>\n
Kenyan investors, said Mr Munuku, are highly sensitive to boardroom wars and the exit of key management even in cases where the squabbles may not be strong enough to affect a firm’s fundamentals.<\/p>\n
George Bodo, a research analyst at Apex Africa Capital, said that boardroom tend to destabilise the market and halting or suspension of trading, which is indefinite, is normally done to win back confidence.<\/p>\n
“This is usually done for the conservation of market integrity,” said Mr Bodo.<\/p>\n
Industrialisation minister Amason Kingi suspended EAPCC’s board and chief executive, Kephar Tande, but the board has said that the government is acting outside its powers as the EAPCC is not a parastatal– a firm where the state controls more than 50 per cent ownership.<\/p>\n
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