Companies

TransCentury sells stake in Tanzania tea firm

bd-transcenturyc

TransCentury chief executive Dr Gachao Kiuna

Investment firm TransCentury is seeking to sell its stake in Tanzania’s tea packaging firm, Chai Bora, as the company shifts focus to the infrastructure sector.

The Nairobi-bourse listed firm said on Saturday in a notice that it had entered into an agreement with an unnamed party that could result in a change of control of its tea packaging subsidiary it bought in 2008.

“The transaction is in line with the group’s overall strategy to focus on infrastructure and engineering,” said Transcentury, adding that the deal will be concluded in January.

The investment firm says it owns 95 per cent of Chai Bora and its acquisition was an attempt by the equity fund to consolidate its expansion in Tanzania.

It became the second company to be acquired by Trans Century after it bought up 70 per cent of power firm ABB Tanelec Ltd.

Chai Bora has faced sluggish revenue and earnings growth in what has seen Transcentury hinge its growth on East Africa Cables and recently acquired Civicon to drive its earnings. Its other subsidiaries are Avery and Tanelec.

Chai Bora’s poor show prompted the investment firm to initiate cost cutting measure in a bid to boost Chai Bora’s margins and analysts believe this forms part of the reason Transcentury is selling the Tanzanian firm.

“The company is expecting further uplift from cost-cutting; reduction in staff numbers and change in packaging to reduce materials,” said TransCentury of Chai Bora in its latest annual report. Chai Bora blends, packs and makes various brands of tea for sale in Tanzania and was previously a subsidiary Tanzania Tea Packers (Tatepa) Group, which is listed on the Dar es Salaam Stock Exchange (DSE).

TransCentury, however, is shifting its focus on the regions mining, oil and gas exploration and infrastructure developments (power lines, road and water facilities) to power its future growth and reduce its reliance on the power sector.

This informed its purchase of a controlling stake Civicon Limited, a regional engineering and logistic firm, last year to get a piece of the lucrative sectors. Civicon has operations in Kenya, Rwanda, South Sudan and Uganda, where it has built roads, petroleum refineries, breweries and laid oil pipelines.

Foreign investors are pouring billions of shillings on oil exploration across East Africa while governments are also revamping power, road and their water networks, watering the market for firms like Civicon.

The Civicon purchase helped TransCentury diversify its business, which has been concentrated in the power sectors, especially with East African Cables, where it has a 63 per cent stake.

Its sales grew to Sh7.1 billion from Sh4.5 billion and this was linked to Civicon, which boosted sales in its engineering division to Sh2 billion last year from Sh400 million in 2010.