Citadel wins battle for railway firm

A boardroom deal struck with the help of the World Bank has left Rift Valley Railways, the company that runs the Kenya-Uganda railway, in the hands of three shareholders and an Egyptian private equity firm, Citadel Capital as majority shareholder.

A joint statement from key protagonists in the ownership battle that has dogged Rift Valley Railways (RVR) since late last year -- Citadel Capital and TransCentury – said a new shareholder structure was being negotiated and is expected to be concluded by mid April.

It will leave Citadel with a 51 per cent shareholding, TransCentury with 34 per cent and a Ugandan investor with a 15 per cent stake.

The fate of five other RVR shareholders Mirambo Holdings (15 per cent), Prime Fuels (15 per cent) and Australia’s Babcock and Brown (10 per cent) and Centum (5 per cent) in RVR was not immediately clear.

People familiar with the deal however said Citadel bought out the five for a total of 80 per cent shareholding and is set to cede a 14 per cent stake to TransCentury and another 15 per cent to a Ugandan investor by sitting out an upcoming $10 million (about Sh750 million) rights issue slated for later this month.

This means Cidatel will assume the position of anchor shareholder in RVR further diminishing TransCentury role in the turnaround of the struggling rail firm.

RVR is currently owned by Sheltam with a 35 per cent stake, TranCentury with a 20 per cent stake and the other partners collectively holding a 45 per cent stake.

The battle for control of the firm has however been tilting in favour of Citadel Capital, the Egyptian firm that entered the scene with the acquisition of a 49 per cent stake in Sheltam, the lead investor in RVR.

Citadel and TransCentury have been battling for control of the rail firm since November last year delaying implementation of the turnaround plan for the railway.

TransCentury, which has a 20 per cent stake in RVR, and with the support of Helios Capital has offered to inject $50 million (Sh3.7 billion) of investment capital into the railway operator on condition that it assumes the lead shareholder role, while Citadel has promised to inject $180 million to turn it around through purchase of new locomotives and rehabilitation of the track.

Last December, Transcentury was outwitted by the Egyptians who were gunning for full takeover of Sheltam’s shares.

Private equity firms have traditionally preferred control of firms they invest in especially where they are required to inject substantive capital as is the case in RVR.

Chances of TransCentury and Citadel striking a compromise in the ownership row have previously appeared slim making yesterday’s announcement a sweet surprise.

Details on the exact sharing formulae used to get the five shareholders out of the scene remained scanty but sources said Citadel is expected to sit out of the capital call leaving the entire stake to TransCentury and the Ugandans to boost their stakes.

Trans Century could still boost its stake through a planned $10 million (about Sh750 million) rights issue later this month.