Former owners of Britania Foods Ltd, trading as trading as Jambo Biscuits, have been accused of cooking books ahead of a Ksh1.2 billion takeover in 2016, and inflating the actual value of the firm by 10 times.
In a case filed in court where Britania Foods Ltd is facing auction, the new owners, Catalyst, say they were duped into buying the confectionery producer at the inflated price, yet the firm was valued at Ksh126 million at that time.
This, in turn, they say has hampered efforts to turn around the firm from loss making into profit territories, which has pushed the firm to default on loans.
Read: Relief For Keroche Breweries As KRA Agrees To Open Brewery Under New Agreement
Britania is currently facing auction after it was placed under administration last year after defaulting on loans of more than Ksh1.3 billion provided by DTB Group and other creditors.
Catalyst says that Jambo Biscuits misrepresented the financial health of the business and breached their pre-completion obligations and warranties.
“This was orchestrated through the falsification of financial statements and other crucial documents, which indicated that the true value of the business was Sh1.2 billion as opposed to Sh126 million, and thus the said respondents acted in breach of the agreement,” Catalyst chief executive Paul Kavuma said in court documents.
Read: KRA: How Keroche Accumulated Billions In Unpaid Taxes
Catalyst says that the misrepresentation has hurt its reputation across the East African region where it has interests in middle-sized companies. Catalyst has stakes in Tanzania’s Chai Bora, ChemiCotex, Effco Solutions, and Zenufa Laboratories, Kenya’s Prime Bank and Orbit Chemical Industries and Ethiopia’s Yes Brands Food and Beverages.
According to valuation from Jambo Biscuits, the company boasted of fixed assets worth Ksh1.18 billion, vehicles worth Ksh17.1 million, and stock and intellectual property rights woth Ksh1,100,000.
Catalyst now wants to reposes Ksh314 million that had been placed in an escrow account to take care of unforeseen risks after the buyout deal.
Read: Tips On Land Acquisition In Kenya today
