From left, TransCentury’s chairman Zephania Mbugua and top shareholders Jimnah Mbaru and Eddy Njoroge. PHGTOS | FILE
What you need to know:
The new shareholder is said to be keen on a reduction in the number of TransCentury directors who concurrently sit on the board of East African Cables Limited -- the investment firm’s subsidiary.
Together with Messrs Waweru, Kimotho and Kanyago, the trio has reduced their stake in TransCentury from 60 per cent five years ago to 47 per cent as of November last year.
Kuramo’s equity injection will further dilute the founder members’ stake in the firm by 34 per cent in a thinning of fortunes that will also impact minority shareholders.
US private equity fund Kuramo Capital’s buyout of a major stake in TransCentury is behind the looming boardroom shakeup at the firm that popularised investment groups in Kenya, the Business Daily has learned.
The deal, which has seen a number of TransCentury’s founder members announce their intention to exit its boardroom, comes two months after Kuramo Capital’s injection of $20 million (Sh2.02 billion) in the infrastructure firm to help it settle a Sh8 billion bond that was maturing in March.
Sources familiar with the deal said Kuramo Capital, a New-York based investment manager, has acquired a 34 per cent stake in TransCentury, effectively making it the single-largest shareholder in the firm.
At least three TransCentury founder members, including former Kenya Revenue Authority (KRA) boss Michael Waweru, businessman Robin Kimotho and Kenya Tea Development Agency chairman Peter Kanyago, have announced plans to retire from the board during the firm’s annual general meeting on June 30.
The departure of the three, which was announced last Wednesday, will leave Zeph Mbugua, the firm’s chairman, as the only founder member on the board, following earlier exits by former chief executive Gachao Kiuna and Joseph Karago.
The Kuramo buyout should also see the US firm snap several seats on the TransCentury board and steer the firm in a preferred direction. TransCentury’s management declined to discuss the details of the transaction with the Business Daily.
“We confirm that TransCentury entered into an agreement with Kuramo Capital to inject $20 million of fresh equity into the business,” the firm said in response to queries on the buyout, adding that “formal announcements, including all relevant information on the entire process, will be made at the appropriate time, in line with regulatory requirements by the Capital Markets Authority”.
Kuramo’s foray into TransCentury’s boardroom began on March 15 when it was announced that the Africa-focused private equity firm was to inject Sh2 billion into the investment firm.
The funds were used to settle part of the Sh8 billion convertible bond that was falling due in a fortnight and had piled immense pressure on the company’s management.
Two days to the bond’s maturity, TransCentury made a second announcement, saying it had reached a settlement with bondholders that halved its principal debt to $40 million (Sh4.04 billion).
“This agreement validates the confidence Kuramo and other investors have in TransCentury and reflects our commitment to maximising investor value,” Mr Mbugua said in a March 25 statement.
Keen on reduction of directors
Details of the twin transactions are now gradually coming to light, with strong indications that Kuramo now owns about a third of TransCentury, a company that started out as an investment group of wealthy Kenyans in 1997.
The new shareholder is said to be keen on a reduction in the number of TransCentury directors who concurrently sit on the board of East African Cables Limited -- the investment firm’s subsidiary.
It is said that the decision to cut cross-directorship is what precipitated the departure of Mr Waweru and Mr Kanyago, who are also directors of the cables firm.
The TransCentury boardroom shakeup leaves Mr Mbugua, Toyota Kenya chairman Dennis Awori and TransCentury’s acting CEO, Nganga Njiinu, as the only directors with seats in the boardrooms of both companies.
The departure of three TransCentury directors leaves the new owners with empty slots to fill and steer the firm back to profitability. Kuramo is expected to make additional and far-reaching demands on TransCentury’s management given the circumstances and the timing of its entry as a strategic investor in a loss-making firm.
Since listing in July 2011, TransCentury’s top 10 founders, including Mr Mbugua, investment banker Jimnah Mbaru and outgoing Nairobi Securities Exchange chairman Eddy Njoroge have cut their combined stake in the firm.
Together with Messrs Waweru, Kimotho and Kanyago, the trio has reduced their stake in TransCentury from 60 per cent five years ago to 47 per cent as of November last year.
Kuramo’s equity injection will further dilute the founder members’ stake in the firm by 34 per cent in a thinning of fortunes that will also impact minority shareholders.
TransCentury is yet to hold an extraordinary general meeting to ratify the material decisions, implying that some shareholders may lack clarity or are opposed to the deals after assessing the full impact of the equity injection.
Besides, TransCentury’s management is yet to reveal how it plans to settle the $20 million (Sh2.02 billion) balance of its convertible bond debt, which must be settled by September 25. READ: TransCentury reaches settlement with bondholders
