UAP Group set to enter OTC shares market

UAP Insurance Group is set to join the over- the- counter (OTC) market, as the company gears up for a limited public share offering and eventual listing at the Nairobi Securities Exchange (NSE).

Senior management of the company said a final decision on the OTC listing had not been made yet, but has been put on the table as the company also plans to raise between Sh750 million and Sh1 billion in a share sale.

The insurance group has applied to the regulator, the Capital Markets Authority (CMA), for approval to tap the capital markets for additional capital.
“It is something (the OTC market) on the table that we are considering,” UPA Group company secretary AK Maina told the Business Daily.

In an investor research note released on Friday after a briefing by UAP’s top management, Dyer and Blair Investment Bank said UAP could join the OTC market “within a month.”

Equity Bank, Co-operative Bank and TransCentury had their shares trading on the OTC prior to listing on the bourse. Both CIC Insurance, which is set to list at the NSE on July 19, and clothing retailer Deacons which also has plans to join the exchange have their shares trading on the OTC market. Listing through the OTC allows shareholders to unlock value of their shares.
The OTC market is, however, not regulated by the CMA, and remains an almost exclusive investment option for institutional and sophisticated individual investors.
UAP made a net profit of Sh975 million last year, from Sh388 million earned in 2010.
Centum Investment is the firm’s biggest shareholder with a 24.2 per cent stake, Chris Kirubi holds 16.88 per cent interest, while the insurance groups’ managing director James Muguiyi has 10.53 per cent.
Chairman Joe Wanjui has a 21 per cent stake in the firm.
The company had announced that it would list on the NSE in 2011, but in September that year it postponed the decision saying the market conditions were not favourable at the time.
High interest rates and inflation levels subdued the stock market towards the end of last year.
UAP has said it plans to float shares on the NSE by introduction within the next 12 to 18 months. The company is now seeking permission from the CMA to raise Sh750 million through a public offer. The regulator requires companies seeking funds from more than 100 persons to get its approval.

Financial muscles
UAP has already secured Sh4.75 billion from international investors and getting the additional funding is meant to boost its financial muscles for expansion.
Private equity funds Aureos contributed Sh1.7 billion, Africinvest (Sh2.1 billion) and Swedfund Sh845 million in the deal. The additional Sh750 million will give it Sh5.25 billion which it plans to mostly deploy in real estate projects. In the investor note released last week, Dyer and Blair’s said property development would take about Sh2.15 billion, the lion’s share of UAP’s planned capital expenditure.
The money will be deployed in Uganda, Kenya and South Sudan.
Dyer says the new capital will be used to develop “UAP Tower in Nairobi, Kenya, Nakawa Business Park in Kampala, Uganda and Equatorial Tower in Juba, South Sudan.” Equatorial Tower is estimated will cost $17 million or Sh1.43 billion and the International Finance Corporation is already lending UAP’s South Sudan subsidiary UAPL $5 million (Sh420 million).
UAP has a 70 per cent stake in UAPL and Central Equatoria Investment Corporation owns the remaining 30 per cent equity stake.
Expanding to Rwanda, Tanzania and South Sudan is to cost Sh1.88 billion, Sh1.09 billion is for increased investments while company reorganization will cost Sh300 million.

jgachiri@ke.nationmedia.com