Family Bank returns to shareholders for cash
Posted Thursday, August 9 2012 at 20:32
Family Bank has made yet another cash call to its shareholders, as the lender seeks to raise an estimated Sh1.2 billion from the market.
An information memorandum for the rights issue seen by the Business Daily says the bank will use the funds to finance expansion and strengthen its balance sheet.
This will be the second cash call by Family Bank in three years, after a similar one in 2009 raised Sh1.5 billion. The rights issue will see the bank sell 40,348,740 new shares to shareholders on the company’s register as at May 31, equivalent to about one share for every six held.
Given its over-the-counter (OTC) price of between Sh38 and Sh35 per share, the bank could be targeting to raise up to Sh1.5 billion.
Rights issue offers are, however, ordinarily discounted to attract shareholder participation, and a discounted rate of about Sh30 per share could see the lender raise at least than Sh1.2 billion.
The rights issue is expected to start Friday and will close on September 12.
Transaction advisors and selling agents Dyer and Blair said that they could not give a specific rights price since this is still being determined based on investor demand.
“We are still doing book building and the price in this process will be determined by investors,” Dyer and Blair chief executive Paul Orem told the Business Daily.
Family Bank has 243 million issued and fully paid up shares and should the rights issue be successful, this will increase to 283 million.
Refunds for any oversubscriptions, update of the share register and trading on the OTC market are expected to take place on October 4.
Johnson Nderi, a research analyst at Suntra Investment Bank, said that it is difficult to estimate an offer price when using book building since the process resembles an auction where investors determine the prevailing price, but the average price on the OTC market can give an indicator of the rights price and by extension how much a firm is seeking in additional capital.
“The offer price should not vary greatly with the last traded price,” said Mr Nderi.
The information memorandum says that the money will be used for a technological update, expansion and strength its books.
“The Bank intends to finance deployment of an Internet banking platform, Visa Card switching platform, further branch expansion and agency banking channel rollouts,” says the chairman’s statement in the information memorandum.
“The Bank shall also leverage on the funds to raise more deposits and grow the loan book further in our key market segment,” the information memorandum adds.