Investors wishing to buy into private equity firm TransCentury upon its debut at the Nairobi Stock Exchange (NSE) next week will do so at a price of Sh50 a share, its managers said on Tuesday.
The pricing means the firm, which began as an investment club at the turn of the millennium and grew steadily to become a multi-billion shilling business, is now worth Sh13.35 billion.
It will enter the Nairobi bourse on July 14 by way of introduction – the listing of privately owned shares at an equities market without an initial public offering (IPO). This method of going public was first used by Equity Bank in 2006 and has since not been used.
Gachao Kiuna, the TransCentury chief executive, said the Sh50 price is based on the company’s valuation and the closing price on June 3 — when it last traded over-the-counter.
“The stock closed trading at over-the-counter market at Sh50 and we will reopen it at that price,” said Dr Kiuna. He added that the listing provides a broader base of investors with an opportunity to participate “in significant growth potential” and offers TransCentury the opportunity to raise capital more easily in the future.
Transaction advisers have split TransCentury into 600 million shares and the 430 owners initially plan to list 418 million shares, out of which 151 million shares will be reserved for buyers of a Sh6.6 billion bond on sale in Mauritius.
The private equity firm that was until recently owned by an elite group of 20 businessmen has expanded its shareholders register to 430 through over-the-counter share trading. It will become only the second new listing at the Nairobi bourse this year.
Dr Kiuna said TransCentury has enough capital to finance its projects for now through internally generated funds and the Sh6.6 billion ($75 million) convertible bonds. However, it will need additional funds to execute current and future projects in the next two years. “We have a bond programme in place that will serve us in the medium term. After about 24 months we might need to look at other ways of raising funds,” he said.
If effected, the convertible bond programme will dilute the shareholding of the 430 individuals to 63.7 per cent through the creation of the additional 151 million shares for allocation to bondholders.
Bondholders, however, have the option to convert their bonds to shares worth between Sh6 billion in the first year and Sh7.5 billion in the fifth year under a conversion criterion contained in the prospectus, giving them a 36.3 per cent stake in the equity investment firm.
Dr Kiuna said TransCentury has drawn Sh3.08 billion ($35 million) of the convertible bonds issued by TC Mauritius Holdings Limited – a TransCentury subsidiary - and that plans are under way to list and trade the bonds on Mauritius Stock Exchange.
The information memorandum indicates that TransCentury intends to invest Sh2.2 billion from the bonds sale “in the Sh23 billion capital expenditure programme to revitalize Rift Valley Railways and unlock the significant value of the railway.”
The balance Sh3.87 billion will be invested in other mega projects including a 100MW geothermal power station in Menengai for which the company has submitted an expression of interest. The value of investment in the power station could be as high as Sh8.1 billion, Dr Kiuna said.
“This will allow TCL to pursue additional investment opportunities in the power and transport infrastructure as well as in specialized engineering that meet our expected rate of return of 25 per cent,” the information memorandum says. Shareholders in Rift Valley Railways are contributing additional funds to shore up the company’s capital base and give it the muscle to repair the railway infrastructure and buy new locomotives for faster movement of cargo and passengers.
Some analysts yesterday described the terms of TransCentury’s entry to the NSE as savvy, pointing to the Capital Markets Authority’s (CMA) decision to allow majority shareholders to sell up to 50 per cent of their stakes in the early days of the listing.
The shareholders will have to hold the remaining half of their stakes for the two years that the capital markets regulator has locked them into the company’s list of owners.
“As a sign of commitment to the growth of the company and confidence in the long-term fundamentals, key shareholders have agreed not to offload 50 per cent of their stake for a period of 24 months after the listing,” says the information memorandum issued to the public Tuesday.
This is a marked departure from Equity Bank’s listing, where the majority shareholders were barred from selling even a single share for a period of two years and from the experience of Scan Groups’ majority shareholders who were locked in for five years after initial public offering. TransCentury is majority owned by 13 shareholders with more than 3 per cent stake each amounting to 190 million shares or 71 per cent of the company.
The largest single owner is the estate of the late James Gachui with 22.3 million shares or an 8.37 per cent stake worth Sh1.12 billion at the price of Sh50 a share.
Kenya Revenue Authority’s Commissioner General, Michael Waweru has a 7.96 per cent stake or 21.2 million shares valued at Sh1.06 billion followed by businessman Peter Kanyango with a 7.17 stake or 19.2 million shares worth Sh957 million.
Dyer and Blair’s chairman Jimnah Mbaru and TransCentury’s chairman Zeph Mbugua have a 6.24 and 6.22 per cent stake respectively or 16.6 million shares each worth Sh830 million each.
NSE’s chairman and Kengen’s chief executive Edward Njoroge has a 5.78 stake or 15.4 million shares valued at Sh771 million while Ephraim Njogu holds a 5.06 per cent stake or 13.5 million shares worth Sh676 million.
Also in the list of majority shareholders are Stephen Waruhiu, Drummond Investment Banks’ chairman Ndungu Gathinji, Joseph Magari, Job Karira, Robin Kimotho and Peter Mbogua.
The remaining 417 shareholders with less than three per cent of the company each share 76.6 million shares or 29 per cent valued at Sh3.83 billion. TransCentury was established in 1997 .
TransCentury owns stakes in cable factories which include East African Cables in Kenya and Tanzania, Cableries du Congo in DR Congo and Kweberg Cables in South Africa, which manufacture wires and transmission cables under its power infrastructure division.