Uchumi Supermarkets targets to raise Sh1.5 billion through a rights issue set to happen in the second half of next year, pricing the offer at Sh15 a piece.
Shareholders of the listed firm Tuesday approved the plan to offer 100 million newly created shares to raise cash to fund local and regional expansion.
The Sh15 targeted offer price is a 21.7 per cent discount off the retailer’s current value at the Nairobi bourse. Most firms use the average trading price over a six months period to arrive at a rights value.
Jonathan Ciano, the Uchumi CEO, said Tuesday the cash will be raised by December 2013 and regulatory approvals will take about five months—pushing the rights issue to the retailer’s first half that runs between July and December.
“The purpose of the rights issue is to finance opening of new branches and refurbishing existing outlets,” Mr Ciano told shareholders at the company’s AGM held in Nairobi Tuesday.
The additional funds will help Uchumi take on competitors Nakumatt and Tuskys, who currently dominate the East African retail scene, and second-tier players Naivas and Ukwala. Nakumatt has 38 branches while Tusky’s has 42 branches in the region.
Uchumi plans to open five new outlets in Eldoret, Kisii, Mombasa, Kisumu and Nateete in Kampala by the close of the current financial year in June 2013, which Mr Ciano said will be funded by internal resources.
The firm projects the new branches will rake in sales totalling Sh2.2 billion.
The supermarket chain said part of the proceeds from the rights issue will be used to enter the retail markets of Rwanda and South Sudan.
Uchumi is targeting to grow it sales to Sh21.2 billion in the year to June from Sh13.9 billion a year earlier on the back of the new branches.
Although the firm’s sales jumped 29.7 per cent to almost Sh14 billion in the year to June, its net profit fell by a third to Sh273 million on higher costs due to the opening of new stores.
The company opened three new stores in Uganda, one in Tanzania and two in Kenya during the year to June.
The retail chain declared a dividend of Sh0.30 per share — the first payout since 2002, a pointer that the management is confident of reversing the drop in profit.
The payout was boon to shareholders who have seen their share rise 185 per cent to touch a high of Sh20 over the past year, making it the top performer at the Nairobi Securities Exchange (NSE) in the period.
This is the second time the retailer is doing a rights issue having raised Sh1.2 billion in a cash call in 2006 intended to finance reorganisation and retire debilitation debt. However, the firm collapsed in June 2006 shortly after raising funds from the public.