Uchumi casts net wider in Sh1.5bn rights issue plan

Listed retail chain Uchumi Supermarkets will sell its shares across all East African countries to tap a larger pool of capital, the management has announced.

The regional rights issue will be followed by a cross-listing of the retail chain’s shares in Uganda, Tanzania and Rwanda, managing director Jonathan Ciano said in an interview on Monday.

“We have an agenda of having a regional rather than a nationalistic outlook, and this is reflected in the expansion into the regional market… We can only do it (rights issue) towards end of the year, one has to go through the regulatory processes of the various capital markets which take time…,” said Mr Ciano.

The retailer is targeting Sh1.5 billion through the issue of 100 million shares, whose offer pricing was set at Sh15 a piece.

Shareholders approved the rights issue during the company’s AGM in December 2012. Shareholders also approved plans to trade on the Uganda Securities Exchange, the Dar es Salaam Stock Exchange and Rwanda’s over-the-counter market.

The rights issue targeted price would be a 28.6 per cent discount on the current share price of Uchumi, which was trading at Sh21 on Monday.

Most firms use the average trading price over a six months period to set a rights value.

The proceeds of the rights issue, Mr Ciano told the AGM, will be used to fund an entry into the South Sudan and Rwandan retail markets.

Uchumi in the meantime plans to open five new outlets in Eldoret, Kisii, Mombasa, Kisumu and Kampala by the close of the current financial year in June 2013, which Mr Ciano said will be funded by internal resources. The new branches are projected by the company to bring in sales totalling Sh2.2 billion.

The retailer is targeting to grow it sales to Sh21.2 billion in the year to June 2013 from Sh13.9 billion a year earlier on the back of the new branches.

The retailer’s expansion plan is set to increase its branch network across Kenya, Tanzania and Uganda to 30, five years after the firm nearly went under in 2006 due to debts owed to suppliers and financiers, which was blamed on its rapid expansion strategy.

Mr Ciano told shareholders that the Uganda branch, expected to open doors by end of the year, would be located outside the capital, Kampala.

The retail sector has attracted huge investor interest based on projections of a rapidly growing middle-income urban population in East Africa Community trading bloc with 130 million people.

The Uchumi rights issue is the second call on shareholders since 2005 when the retailer raised Sh1.27 billion to finance its ill fated expansion in 2006.

The Uchumi share ranked as the best performing in 2012 at the NSE having appreciated by 156 per cent (Sh7.50 to Sh19.05) from January to December 2012. This has attracted increased foreign investor interest in the stock.