TransCentury to cede 2.2pc stake in share swap deal
TransCentury chairman Zephaniah Mbugua (left) with the MD Gachau Kiuna. Aureos is set to own 2.2 per cent shares of infrastructure investment firm TransCentury. Photo/FILE
What you need to know:
Aureos is in the process of swapping its stake in electrical and telecom wires manufacturer East African Cables, in exchange for shareholding in TransCentury.
TransCentury and Aureos have a combined 68.38 per cent interest in EA Cables through investment vehicle Cable Holdings, which they co-own in the ratio 94.8 per cent and 5.2 per cent respectively.
TransCentury says it has exercised its right of first refusal in Cable Holdings, offering to buy out Aureos through its stock instead of cash.
Private equity fund Aureos is set to own 2.2 per cent shares of infrastructure investment firm TransCentury once an ongoing share swap deal involving the two companies’ equity stake in East African Cables is completed.
Aureos is in the process of swapping its stake in electrical and telecom wires manufacturer East African Cables, in exchange for shareholding in TransCentury.
“Aureos will take a 2.2 per cent stake in TransCentury in the transaction,” said TransCentury chairman Zephaniah Mbugua at the company’s AGM Thursday.
TransCentury and Aureos have a combined 68.38 per cent interest in EA Cables through investment vehicle Cable Holdings, which they co-own in the ratio 94.8 per cent and 5.2 per cent respectively.
This means that TransCentury’s effective stake in the cables manufacturer stands at 64.82 per cent while that of Aureos is 3.55 per cent.
Mr Mbugua did not disclose the price at which Aureos’ shares in EA Cables will be converted to the investment firm’s stock. Going by Thursday’s trading price at the Nairobi Securities Exchange, Aureos stake in TransCentury is valued at Sh138.6 million.
TransCentury says it has exercised its right of first refusal in Cable Holdings, offering to buy out Aureos through its stock instead of cash.
Post-transaction, TransCentury will take full control of Cable Holdings’ 68.38 per cent equity in EA Cables, which is one of its key subsidiaries.
The share swap will be based on the weighted average trading price of the two companies in the 90 days ending February, at a ratio of just under two shares of EA Cables for each unit of TransCentury’s stock.
The deal period was locked ahead of TransCentury’s recent price drop to a new low of Sh23 as at close of business Thursday.
During the 90 days under consideration, TransCentury’s shares traded at a simple average of Sh29.4 compared to EA Cables’ Sh15.5, according to market data.
The transaction will see Aureos emerge among the top owners of TransCentury, which will issue an estimated 6.1 million shares to the PE fund.
The transactions is set to be closed in the next few days. The deal will see TransCentury’s issued shares rise to 279.9 million from the current 273.9 million, leading to a 2.2 per cent dilution of existing investors.
The diluted shareholders will, however, benefit by taking a larger share of EA Cables’ earnings. The share swap deal will also help to preserve cash for TransCentury.
“We opted to issue our stock so as not to distort our cash flows,” Mr Mbugua said.
As of December, TransCentury’s cash flow position was a negative Sh69.1 million compared to a negative Sh2.5 billion in the same month the year before.
Its liquidity is, however, expected to have improved with the receipt of Sh3.8 billion in March from its divestiture in Rift Valley Railways (RVR).
It was paid the amount by Cairo-based Citadel Capital, which acquired its 34 per cent stake in the railway concession.
While TransCentury recouped its entire cash investment in RVR, the exit saw it incur a Sh1 billion loss reflecting the differential from the Sh4.8 billion fair value of the investment.
The loss has seen the company issue a profit warning for the year ending December when it expects its net earnings to decline materially from the Sh626.4 million it recorded last year.
The company says EA Cables is one of its key subsidiaries in the energy and infrastructure sectors where it is going to invest more to grow its earnings.
The subsidiary’s key customers include Kenya Power and contractors wiring homes and office blocks.
TransCentury has invested in a new geothermal power plant in Menengai as part of its strategy of deepening its presence in the energy sector.
The company said it had teamed up with a consortium of investors to negotiate a power purchase agreement for the 35 megawatts project.
