Treasury pledge to take up Uchumi shares unlocks issue
Uchumi Supermarkets CEO Jonathan Ciano briefs the media during the release of the retailer’s full -year results last September. PHOTO | FILE
What you need to know:
Uchumi set for offer after State assurance in firm’s plans to sell 100 million shares.
The government is the single largest shareholder of Uchumi, with a 13.4 per cent stake.
Delays in holding the rights issue since 2012 when it was first announced have seen the retailer miss out on a share price rally that would have offered it greater headroom setting the price.
The Treasury has written to Uchumi Supermarkets committing to take up its full allocation of shares in the upcoming rights issue, paving the way for the retailer to make its long-delayed cash call of up to Sh1.5 billion.
Uchumi’s CEO Jonathan Ciano said in an interview Monday the retailer has received a letter from the Treasury backing the rights issue.
The government is the single largest shareholder of Uchumi, with a 13.4 per cent stake.
“We are now ready to proceed with the rights issue whose timetable should be out in a week or two,” Mr Ciano told the Business Daily.
Uchumi plans to sell up to 100 million shares to its shareholders.
Going by the initial price target of about Sh15 per share, the rights issue could raise up to Sh1.5 billion but Mr Ciano said the pricing of the cash call has not yet been determined.
Delays in holding the rights issue since 2012 when it was first announced have seen the retailer miss out on a share price rally that would have offered it greater headroom setting the price.
The firm’s share has dropped 42.6 per cent in the past one year to trade at Sh12, significantly below the initial estimate of Sh15 for the cash call.
The stock had rallied to touch highs of Sh21.75 last year, before receding to the current level of Sh11.25.
The dip in share price has been linked to a weaker performance in the first half ended December, when its net profit declined 19 per cent to Sh106.9 million on lower sales and higher finance costs.
Rights issues at the Nairobi Securities Exchange have traditionally been offered at double-digit discounts to the ruling market price, which could influence Uchumi’s pricing decision.
Diamond Trust Bank (DTB), for instance, priced its Sh3.6 billion rights issue at Sh165 equivalent to a 31.8 per cent discount on its current trading price of Sh242.
Uchumi’s rights issue had been deferred due to a delay in receiving regulatory approvals and Treasury’s commitment to take up its full rights.
Delay of the cash call last year forced Uchumi to borrow Sh300 million from State-owned Industrial and Commercial Development Corporation (ICDC) to fund its growth in the interim period.
ICDC is a development finance institution that owns a 2.73 per cent stake in the retail chain.
The cash call will see Uchumi’s issued ordinary shares rise to 365.4 million from the current 265.4 million, representing a potential dilution of 37.6 per cent for existing shareholders who forego their rights.
The fundraising will target investors in Kenya, Tanzania, Uganda and Rwanda securities markets, with the company set to cross-list on the Dar es Salaam Securities Exchange next month.
Mr Ciano said proceeds of the rights issue would be used to fund the company’s growth in the regional retail market where increased economic growth is fuelling consumer spending.
Uchumi earlier this year opened four stores in Kisumu, Maua, Juja and Syokimau, raising its total branch network in East Africa to 34.
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