Investment firm TransCentury has sold its entire 95 per cent stake in Tanzania’s tea packaging firm Chai Bora to a private equity firm so as to deploy the cash in the lucrative power and infrastructure market.
The Nairobi-bourse listed firm Wednesday announced that it had sold the stake to Catalyst Principal Partners, a fund established in 2009 with a bias for East Africa, for an undisclosed fee.
TransCentury bought the tea packaging firm in 2008 to get a hold of the agro sector and diversify its reach beyond the Kenyan market.
This is the second deal closed by Catalyst after the firm bought a Tanzanian manufacturing firm Chemi & Cotex in 2011. It recently raised Sh10.6 billion for new investments in East Africa.
“Proceeds from the sale will be redeployed into TransCentury’s core divisions (engineering, power, and transport infrastructure),” said Gachao Kiuna, the CEO, in a statement.
Chai Bora has faced sluggish revenue and earnings growth in what has seen TransCentury hinge its growth on East Africa Cables and recently acquired Civicon to drive its earnings.
The investment firm’s other subsidiaries are Avery and ABB Tanelec Ltd. Chai Bora’s poor show prompted the investment firm to initiate cost-cutting measures to boost its margins and analysts believe this forms part of the reason TransCentury is selling the Tanzanian firm.
“The company is expecting further uplift from cost-cutting; reduction in staff numbers and change in packaging to reduce materials,” said TransCentury of Chai Bora in its latest annual report.
Chai Bora blends, packs and makes various brands of tea for sale in Tanzania and was previously a subsidiary of Tanzania Tea Packers (Tatepa) Group, which is listed on the Dar es Salaam Stock Exchange.
The purchase of Chai Bora was an attempt by TransCentury to consolidate its expansion in Tanzania.
It became the second company to be acquired by TransCentury after it bought 70 per cent of power firm ABB Tanelec Ltd.
TransCentury, however, is shifting its focus to mining, oil and gas exploration and infrastructure developments (power lines, road and water facilities) to shape its future growth.
This informed its purchase of a 63 per cent stake in Civicon Limited, a regional engineering and logistic firm, last year to get a piece of the lucrative sectors. The Civicon deal was worth $36 million (Sh3 billion) and included a share swap restructuring.
Civicon has operations in Kenya, Rwanda, South Sudan and Uganda, where it has built roads, petroleum refineries, breweries, laid oil pipelines and is now on oil exploration.
Foreign investors are pouring billions of shillings in oil exploration across East Africa while governments are also revamping power, road and their water networks, watering the market for firms like Civicon.
The Civicon purchase helped TransCentury diversify its business, which has been concentrated in the power sectors, especially with East African Cables, where it has a 63 per cent stake.
TransCentury’s half- year net profit rose five-fold to Sh326 million in June compared to Sh54 million the year before, as sales jumped 56 per cent to Sh7 billion from Sh4.5 billion.
But its share price has more than halved since its debut at the Nairobi Securities Exchange to Sh24 compared to the listing offer price of Sh50.