British American to review projects after IPO shortfall

British American Investments Company will scale down property development projects following an under-subscription of its initial public offer (IPO) which raised 60 per cent (Sh3.5 billion) of the expected proceeds.

“The property development initiative where the bulk of the funds were targeted will be reviewed with a view to scaling it down,” British-American Group managing director Benson Wairegi said in a statement.

British American had planned to spend Sh2.5 billion on property development.

The company was also to set aside Sh1 billion for regional expansion. It was to use Sh1.28 billion for expansion of operations in the Kenyan market, including the asset management business and the launch of new funds for Kenyans in the diaspora as well as local and international investors.

Mr Wairegi said the company may consider using bank loans to finance other planned projects.

“The group has no other gearing despite the very strong balance sheet, which has become even stronger with the raising of Sh3.5 billion,” said Mr Wairegi.

“We shall, therefore, be able to easily leverage to implement all the profitable projects that have been lined up.” Foreign investors took less than one per cent of the 195 million shares set aside for them in the offer while qualified institutional investors (QII) took only 38 per cent of their 240.5 million shares allocation.

The most enthusiastic participants in the IPO were East African retail investors who applied for more shares than had been allocated to them. They were offered 195 million worth of shares but applied for 276.8 million shares — amounting to 142 per cent subscription.

Employees and agents also took slightly more shares than they were offered.

The group targeted to raise Sh5.58 billion for expansion locally and in the region.

The company offered a total of 650 million new ordinary shares at Sh9 per share, for period of three weeks ending August 5.

British American is keen on taking advantage of emerging opportunities through innovative products such as micro-insurance and bancassurance.

The firm was to set aside Sh2.5 billion for development of real estate properties.

In particular, the company was to use the money to develop property investments including commercial buildings and housing units and set up real estate investment trusts when the proposed law comes into effect.

British American will also use Sh750 million to off set a Commercial Bank of Africa (CBA) loan, which had a Sh749.3 million balance as at the end of last December. It pays an interest at CBA’s base rate less 2.5 per cent for the loan.