Uchumi chief executive Jonathan Ciano. He said the retailer would tie its plans to the price. FILE
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Uchumi cites the need to finance expansion, pushing target from Sh1.5bn.
Uchumi has raised its rights issue target to more than Sh2 billion against an earlier target of Sh1.5 billion, citing the need to finance its regional expansion using shareholders’ funds rather than internal cash reserves.
In a presentation made at Uchumi’s AGM held on December 11 2012, chief executive Jonathan Ciano told shareholders the retailer was targeting Sh1.5 billion through a sale of additional 100 million ordinary shares.
The CEO however said at a press conference on Tuesday the amount to be raised will determined by the company’s expansion budget and the retailer’s market price at the time of issue.
“Even if we got Sh2 billion we still have an appetite for more. You can only extrapolate. We want to see what the price will be and then we can tie our plans to that,” said the CEO on Tuesday when he announced the transaction advisors for the rights issue and cross listing in regional stock markets.
Uchumi’s rights will be sold across Kenya, Uganda, Tanzania and Rwanda, and is expected to come after cross-listing in the three markets.
Transaction advisors and lead sponsoring broker for the rights issue and cross listing, Faida Investment Bank, also refrained from giving a definitive figure as the new target for the rights issue.
“The company has not decided firmly on how much in total they would like to raise. As we get closer to the issue we will watch the market and see where the price is, then we will give the actual price,” said Faida Investment Bank chairman Bob Karina.
He added that the cross listing, which is set tentatively for August, and the rights issue set for the end of the year, are in the preparation stage. Transaction advisory partners in Uganda, Tanzania and Rwanda have also been appointed.
In Uganda, the transactions will be handled by UAP Financial Services, in Tanzania by Rasilimali Limited while in Rwanda it will be Faida Securities Rwanda, a subsidiary of Faida Investment Bank Kenya.
Mr Ciano said that Uchumi would determine the percentage of shares to be made available in each country once the transaction advisors assess the respective markets to gauge the appetite for the shares following the cross-listing.
He also said that the move to raise the funds from the rights issue that will be primarily used to fund expansion and refurbishment of existing branches marks a shift from dependence on retained earnings as the main source of development capital.
“It is time to release funds to shareholders through dividends rather than plough back into the business. We also need to expand our shareholder base to the region as we target the bigger regional market,” said Mr Ciano.
Uchumi is planning to open 13 new branches in the region, including Rwanda and South Sudan, in the next one year. Currently it has 29 branches in Kenya, Uganda and Tanzania,
The company paid a dividend of Sh0.30 per share in the 2011/12 financial year, the first time it did so in 10 years.
In its disclosures to shareholders, the company stated that it invested Sh513 million in new branches in 2012, as it races to keep pace with its rivals Tuskys and Nakumatt, which have also gone regional.
Uchumi recorded gross sales of Sh15.67 billion in 2012. It has projected to double this sum to Sh32.72 billion by 2015.
