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Capital Markets

British American to review projects after IPO shortfall

British American head offices in Nairobi. The company now has market value of just over Sh17 billion — the highest among listed insurance firms, based on its offer price at the initial public offering. File
British American head offices in Nairobi. The company now has market value of just over Sh17 billion — the highest among listed insurance firms, based on its offer price at the initial public offering. File 

British American Investments Company will scale down property development projects following an under-subscription of its initial public offer (IPO) which raised 60 per cent (Sh3.5 billion) of the expected proceeds.

“The property development initiative where the bulk of the funds were targeted will be reviewed with a view to scaling it down,” British-American Group managing director Benson Wairegi said in a statement.

British American had planned to spend Sh2.5 billion on property development.

The company was also to set aside Sh1 billion for regional expansion. It was to use Sh1.28 billion for expansion of operations in the Kenyan market, including the asset management business and the launch of new funds for Kenyans in the diaspora as well as local and international investors.

Mr Wairegi said the company may consider using bank loans to finance other planned projects.

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“The group has no other gearing despite the very strong balance sheet, which has become even stronger with the raising of Sh3.5 billion,” said Mr Wairegi.

“We shall, therefore, be able to easily leverage to implement all the profitable projects that have been lined up.” Foreign investors took less than one per cent of the 195 million shares set aside for them in the offer while qualified institutional investors (QII) took only 38 per cent of their 240.5 million shares allocation.

The most enthusiastic participants in the IPO were East African retail investors who applied for more shares than had been allocated to them. They were offered 195 million worth of shares but applied for 276.8 million shares — amounting to 142 per cent subscription.

Employees and agents also took slightly more shares than they were offered.

The group targeted to raise Sh5.58 billion for expansion locally and in the region.

The company offered a total of 650 million new ordinary shares at Sh9 per share, for period of three weeks ending August 5.

British American is keen on taking advantage of emerging opportunities through innovative products such as micro-insurance and bancassurance.

The firm was to set aside Sh2.5 billion for development of real estate properties.

In particular, the company was to use the money to develop property investments including commercial buildings and housing units and set up real estate investment trusts when the proposed law comes into effect.

British American will also use Sh750 million to off set a Commercial Bank of Africa (CBA) loan, which had a Sh749.3 million balance as at the end of last December. It pays an interest at CBA’s base rate less 2.5 per cent for the loan.

Bearish run

Expenses of the offer were Sh320 million.

The IPO was partly hit by investor jitters in international financial markets and a bearish run at the Nairobi Stock Exchange (NSE).

“It was unfortunate that the US debt crisis escalated right in the middle of the offer period, causing loss of appetite amongst institutional investors especially those outside Kenya,” said Group chairman Nicholas Ashford- Hodges.

In July, the company launched its insurance services business in Uganda through a subsidiary, Britam Insurance Company (Uganda) Limited, which has a capital of Sh197 million (Ush5.6 billion).

“This IPO will give British American an opportunity to increase the scope of its operations and widen its footprint,” said Mr Ashford- Hodges in July. He said the company’s next step would be to open offices in Tanzania, Rwanda, and Southern Sudan.

British American is also the holding company of British American Insurance Company (Kenya) Ltd, British American Asset Managers Ltd and Britam Insurance Company of Uganda.

At the offer price, the company now has market value of just over Sh17 billion — the highest among listed insurance firms.
CfC Insurance Holdings, which got listed at the NSE by introduction in April, was valued at Sh5.4 billion as at the close of trading on Monday, Jubilee Holdings Ltd at Sh9.5 billion and Pan African Insurance at Sh2.6 billion.

Success threshold

In a press release, the company noted that it had surpassed the minimum success threshold of 50 per cent set out in the prospectus and also  met the minimum shareholder’s requirement of 1,000 to list on the Main Investment Market Segment of the NSE.

Mr Ashford-Hodges said in the statement that the company had also met the minimum shareholding requirement that at least 25 per cent of the shares in the company be held by not less than 1,000 shareholders and that at least 40 per cent of the shares on offer are allotted to local investors” said.

“We now have over 28,000 shareholders,” said Mr Ashford-Hodges.

British American Group posted Sh2.7 billion in profits after tax last year compared to a Sh421 million loss in 2009.

It made Sh4.68 billion in investment income and Sh220 million in other income up from Sh196 million and Sh32 million, respectively.

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