The fight among billionaires for the control of Mumias Sugar Company has escalated after the High Court suspended the planned leasing of the ailing miller to a Ugandan-based tycoon.
Justice Anthony Ndung’u froze the 20-year-old lease offered to Sarrai Group after businessman Julius Mwale through his firm, Tumaz and Tumaz Enterprises, sued against the offer, saying the bidding was tainted with fraud, mistakes and illegalities.
Sarrai Group, which is associated with Kenyan businessman Sarbi Singh Rai, placed the third-highest bid of Sh11.5 billion in the lease battle, while Tumaz and Tumaz, through businessman Julius Mwale placed the highest bid of Sh27.6 billion.
Mr Mwale argued that the receiver-manager, Ponangipalli Rao, failed to give all the bidders an open and transparent opportunity, thus compromising the integrity, fairness and accountability of the process in breach of the Constitution.
Justice Ndung’u froze the signing of the lease agreement and allowed Mr Mwale to push for quashing of the Sarrai deal and start of the leasing process afresh.
“On the strength of the averments made, I certify the matter as urgent and admit it to hearing during the court’s recess. Upon perusal of the chamber summons seeking leave to apply for the orders of certiorari, prohibition and mandamus, I am satisfied that the applicant has achieved the legal threshold necessary for grant of leave. I grant leave in terms of prayer 2, 3 and 4,” the judge said.
The judge directed Mr Mwale to file the main case within three days and the respondents to file theirs seven days afterwards. He directed the case to be heard on January 24.
The miller was in September 2019 placed under receivership by KCB Group to protect its assets and maintain its operations.
Its shares were then suspended from the Nairobi bourse, and the leasing deal will be keenly watched by shareholders, including the State with a 20 percent stake, and creditors who are owed more than Sh11 billion.
Sarbi’s siblings, through West Kenya Sugar, and under the watch of his brother Jaswant Rai, offered Sh3.5 billion with steel tycoon Narendra Raval placing a bid of Sh8.4 billion in a contest that attracted eight bidders.
The 20-year lease, however, excludes assets in the firm’s ethanol and power generation plants, which were last month seized from KCB Group by Ecobank and French development financier, Proparco, which are owed Sh2 billion and Sh1.9 billion respectively.
Mr Mwale argues that after submitting his bid and attending the tender opening, he never heard from Mr Rao until December 22, when he learnt that the tender had been awarded to Sarrai Group.
“The 1st Respondent failed to notify the Applicant of the outcome of its bid. Further, the 1st Respondent has refused to disclose to the Applicant the outcome of its bid in violation of the right to information under Article 35(1) of the Constitution of Kenya, 2010,” he submitted.
Mr Mwale says it was not until on December 24 when Mr Rao communicated to him that the leasing of the assets belonging to Mumias had been offered to Sarrai, without giving any reasons for reaching the decision.
“To date, no reasons or explanation from the 1st Respondent has been issued to the Applicant to inform that Applicant that its bid was unsuccessful or to state that its bid was incomplete and or the non-responsive,” he said.
Sarrai Group is a Ugandan conglomerate consisting of different agro-manufacturing companies, which run three sugar factories in the neighbouring country, producing about 170,000 tonnes of sugar annually. It also has operations in Malawi.
The receiver-manager said the multinational was best placed to revive operations of the ailing miller, owing to its expertise in the field, as shown by its performance in Uganda.
For Sarbi, the Mumias Sugar deal set the stage for market share war with his brother and billionaire Jaswant whose family controls half of the commodity’s sales in Kenya.
Rai family firms — West Kenya, Sukari Industries and Olepito — have taken the market previously occupied by Mumias with their Kabras Sugar brand. At its peak, Mumias had more than 60 percent market share.
Mr Sarbi and Jaswant took different paths in the wake of family disagreements that have culminated in a vicious court fight for the control of the Rai family’s multibillion-shilling estate.
Mr Mwale had also unveiled a multi-billion shilling package that he says will lead to the upgrade of the rundown production plant and attract farmers back to cane production.
A former air force engineer, he is behind the so-called Mwale City that seeks to transform Lunza, a sleepy village in Kakamega County, into a ‘Silicon Valley’ worth at least Sh200 billion.
Unlike the other State-owned sugar firms where the bidding was through public tendering, the receiver-manager said the Mumias issue was handled through a private treaty between the investor and the bidders.
Mwale’s viability, financing and progress of the investment have been questioned by many analysts amid court fights over unpaid contractor dues and regulatory approvals for the project.