Roto tank and Zoe lotion maker plan NSE listing

Flame Tree Group, a family-owned manufacturing concern, plans to list on the Nairobi Securities Exchange (NSE) making it the only such listing in 17 years.

The firm, whose brands include Roto tanks and Zoe brand of cosmetics, plans to list on the NSE’s Growth Enterprise Market Segment (Gems) in the last quarter of this year. Both brands enjoy high visibility in the water storage and beauty industries respectively.

ARM Cement was the last family-owned manufacturer to list at the NSE in 1997. NIC Bank, telco Access Kenya (which delisted last year) and media firm Scangroup joined the bourse much later.

The company said the listing is meant to give it access to the capital markets which offers more affordable funding, either through debt or equity, required to fuel future growth.

Flame Tree chief executive and founder Heril Bangera said the listing on the less restrictive Gems will also unlock value for present and future shareholders.

“We are committed to offering value to our future shareholders from the start and sharing with them the financial and social benefits of creating a pan African Group,” said Mr Bangera in a statement.

The manufacturer has appointed Burbidge Capital the nominated advisors, Viva Africa the structuring consultant, PKF as reporting accountants while Coulson Harney will handle the legal work.

Flame Tree has three divisions spread across manufacturing of plastic goods, fast moving consumer goods (FMCG) while the other is a trading company.

The manufacturer operates in Rwanda, Ethiopia, Mozambique, DRC, Burundi and Sudan and as at the end of 2013 had revenues of around Sh2.2 billion.

Flame Tree said the expansion bid is driven by the growing middle class that has created a large market for consumer goods.

The company that was founded 25 years ago becomes the second family-owned firm to announce that it plans to list on the Gems this year.

Mayfox Mining, which is prospecting for gold in Turkana County, announced in March that it would list by the end of the year. Mayfox is majority owned by the Manga Mugwe family through Mayfox Mining Mauritius Ltd.

READ: Mayfox Mining automating systems ahead of NSE listing

Like Flame Tree, May Fox also plans to use its listing on the Gems to raise additional capital in the future. The transaction advisors said the listing of Flame Tree should usher more such companies at the exchange.

“The Flame Tree Group listing is intended to be a win-win for existing and new shareholders alike. We believe this will also propel the Gems market forward and contribute to the future growth of the local capital markets,” said Burbidge Capital chief executive Edward Burbidge.

Analysts said the capital markets ability to offer credit at more favourable terms is driving family businesses to go public.

“With the introduction of Gems, which has less strict listing criteria, the bourse offers family businesses an avenue to raise capital, albeit cheaply compared to commercial loans,” said Moses Waireri, the head of research at Sterling Capital.

Mr Waireri noted that the disclosure that comes with going public makes investors more comfortable in lending to the companies, hence strengthening corporate governance.

Other family-owned businesses have sought capital for expansion by inviting strategic partners such as private equity firms.

Fusion Capital, a private equity and fund management firm, injected Sh245 million into GAL Baking Services Limited for its branch network expansion while Grofin invested Sh26 million in Palmy Enterprises, a firm that manufactures sanitary products.

By and large, family businesses have preferred to use bank lending, corporate bonds, commercial paper or international financiers to fund their expansion. Outsiders have found it difficult accessing stakes in the companies, including large retailers and manufacturers.