Stockbrokers who represented clients who sold their shares in the tender offer made millions in trade commissions thanks to the recently completed Sh22.7 billion purchase of extra EABL shares by British giant Diageo.
A commission of up to 2.1 percent may be charged for equity trading at the Nairobi Securities Exchange (NSE) for transactions under Sh100,000 and a maximum of 1.7 percent may be charged for transactions beyond this amount, including regulator, custodial, and bourse levies.
On paper, Diageo’s entire expenditure of Sh22.7 billion should have resulted in commissions for market intermediaries worth Sh386.4 million; however, given the provision for negotiating, this figure was probably lower.
“The people selling were not charged a commission but Diageo was paying to brokers,” said Muathi Kilonzo, head of equities brokerage at EFG Hermes Kenya.
Adding, “The commission paid depends on the negotiated rate with each broker who gave different rates. This was an arranged transaction therefore they paid below normal commission charge.”
According to numerous market sources, Diageo was in charge of paying the commission on the transfers of shares from the minority investors, and because it was a tender offer, the agreement was characterized as a one-way transaction.