Centum sets aside Sh390m to buy majority stake in Longhorn

Centum Investment has set aside over Sh390 million as it prepares to take a majority stake in Longhorn Publishers during its upcoming Sh530 million rights issue.

The investment firm currently holds a 31.25 per cent stake in Longhorn, having sold some 2.1 million shares in 2014 in a transaction that reduced its equity from 34.9 per cent when the publisher listed in March 2012.

Centum now wants not only to defend its stake in the company but also to raise its ownership beyond 51 per cent, a move that would see it overtake founder shareholder Francis Nyammo whose equity stands at 34.89 per cent.

“Centum has declared … they intend to take up their rights and take up at least 50 per cent of total available rights,” Longhorn said in a statement.

“This might take their shareholding to above 51 per cent, but the shareholder has categorically stated they have no intention to take over the company.”
The investment firm is entitled to buy 39.4 million shares in the rights issue at the offer price of Sh4.2 per share, placing its minimum participation at Sh165.6 million.

Raising its stake to 51 per cent in the publisher would require buying an additional 53.8 million shares, raising its total investment to Sh391.6 million.

Unlimited shares
Centum says it is ready to take up an unlimited number of shares from investors who will not participate in the cash call, indicating that its ownership could rise above the 51 per cent level.

“We are supportive of the company,” James Mworia, Centum’s chief executive told Business Daily in an interview.

“We are prepared to take up any shares left. There is no limit,” he said, adding that Centum is confident about Longhorn’s future prospects. Longhorn said Centum has committed not to take over the company, meaning it will not make an offer to buy out minority shareholders after raising its stake.

“In the event a shareholder may trigger a takeover by taking additional rights, the shareholder shall request for exemption from initiating a takeover to the Capital Markets Authority,” Longhorn said.

The offer price of Sh4.2 per share represents a 16 per cent discount on Longhorn’s closing price of Sh5 on Friday.

The publisher’s stock touched all-times lows of Sh3.7 last year after cutting its dividend payout amid weaker results for the full year ended June 2015.
Longhorn says it will prioritise debt payment and boosting working capital in using proceeds from the rights issue.

The publisher owes Sh100 million to Nabo Capital, a subsidiary of Centum which deals in asset management for institutions and high-net-worth clients.
Longhorn has also earmarked Sh100 million for working capital and Sh50 million for creation of digital learning materials.

Other strategic initiatives include product diversification (Sh100 million), geographical diversification (Sh80 million) and acquisitions (Sh70 million). The company has announced plans to launch new products including story books and college textbooks. It also intends to develop proprietary e-learning platforms as part of its drive towards digital educational content.

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