Companies

TransCentury set to buy shares in engineering firm

tcl

TransCentury CEO Dr Gachao Kiuna announces the listing of the company on the Nairobi Stock Exchange earlier in the year. TCL has announced plans to acquire a majority stake in an engineering and logistic firm as it races to reduce its reliance on East African Cables. File

Investment firm TransCentury (TCL) has announced plans to acquire a majority stake in an engineering and logistic firm as it races to reduce its reliance on East African Cables.

The firm said it had entered into a purchase agreement with Civicon Limited on Wednesday for purchase of a majority stake for undisclosed price and called on shareholders to approve the deal in December 6..

Civicon has operations in Kenya, Rwanda, South Sudan and Uganda, serving markets in central, eastern and southern Africa where it has built roads, petroleum refineries, breweries, and laid oil pipelines.

The deal will help TransCentury diversify its business that is concentrated in the power sectors, with East African Cables—where it has a 63 per cent stake—accounting for half its revenues.
“The directors of the company are hereby duly authorised to invest directly or indirectly in the ordinary capital of Civicon Limited and its affiliates in the engineering sector,” said TransCentury in a notice to the Nairobi Securities Exchange (NSE).

It also asked shareholders to give it the greenlight to increase its holding beyond the stake its keen to buy this year—signalling it is appetite for a 100 per cent holding in the firm. It did not disclose the stake it is going to buy in the talks that it opened on Wednesday.

Analysts, led by Kestrel’s Wycliffe Masinde, expect the investment firm to finance the deal with proceeds from the $75 million (Sh7.5 billion) bond the firm issued in Mauritius.

It is issuing the bond in tranches to avoid paying interest (six per cent per annum) on cash that it does not require .So far, it has raised $35 million (Sh3.5 billion) from bond, but it still needs more money to inject in the struggling Rift Valley Railways (RVR) where it owns a 34 per cent stake.

TransCentury is expected along with Egypt’s Citadel Capital and Uganda’s Bomi Holdings Limited to inject $82 million (Sh8.2 billion) to revamp RVRs wagons and rail lines to boost the firm’s performance and earn its shareholders dividends.

Its purchase of Civicon Limited will deepen its presence in the engineering business that accounts for about six per cent of its revenues and it controls it through Avery East Africa—which sells and maintain industrial weigh scales.

The power sectors accounts for about 80 per cent of its revenues while consumer business that it serves with Tea firm Chai Bora takes 13 per cent of its sales.

TransCentury books East Africa Cables sales, dividends and profits its profit and loss statement since the cable firm is its subsidiary and accounts 51 per cent of its revenues.

This means that its earnings cycle is greatly influenced by the cable firm’s performance—a trend that TransCentury is keen to break with acquisitions such as Civicon Limited.

Civicon Limited is handling road construction works in South Sudan worth Sh27 billion, construction of a Sh360 million power station for KenGen and Sh31 billion oil terminal in Mombasa. The firm, which listed at the Nairobi Stock Exchange on July 14, announced half-year net profits of Sh53.8 million compared to a loss of Sh167 million in the same period last year.

Its sales grew by 40.6 per cent and revenue to Sh4.5 billion