When Old Mutual made the first bid, it is Chris Kirubi who decided to the South Africans investing manners. He deceived them to buy his shares at almost 3 times their book value.

The gullible Old Mutual paid a whooping Sh20.8 billion to acquire a 60.7% of UAP from Kirubi and Africinvest. But this 60.7% interest had only book value of Sh8.9 billion at the time. Kirubi and Africivest got a free Ksh 11B

No sooner had the transaction been closed, than Old Mutual realized they have been conned. They wrote off an extra 9 billion paid from their books through impairment of goodwill.

As this was going on, Professor Joe Wanjoi, also an investor in UAP, was watching. He decided to piggyback on Kirubi’s deal to make a killing.

Although, unlike Kirubi, he was a minority shareholder, he asked Kirubi to sit, watch and learn. At the time of signing of the deal, Wanjoi said he was not selling, but willing to sell.

He entered into a put option with the company. A put option is a financial instrument that gives the holder a right, but not an obligation, to sell shares at an agreed price on or before a particular date.

The put option said, its exercise price would be equal to the price they paid Kirubi, but increased by one year treasury bond rates and reduced by any dividends declared by UAP.

This was terrible arrangement on part of Old Mutual. Apart from being given raw deal by Kirubi, they would again pay for that raw deal plus an incremental interest.

Joe Wanjoi bayed his time. This week, the old Joe decided to exercise his put. He told Old Mutual, I want out. They had no option but to buy. That way, Joe Wanjoi made a tidy sum of Ksh 3 billion, 31% more in value, of what was paid to Kirubi.

Warren Buffet, the sage of Omaha, said options (and other derivatives) are financial instruments of mass destruction. Old Mutual must be writhing.