Private equity firm Kuramo Capital plans to invest up to Sh1.1 billion in TransCentury’s ongoing rights issue, a move that could raise its stake in the company to more than 48 per cent.
Kuramo currently has a 25 per cent interest or 93.7 million shares in the infrastructure investment firm, entitling it to buy 468.8 million additional shares at the set price of Sh1.1 apiece.
This places its investment in the cash call at Sh515.7 million under normal entitlement that will defend its stake in the company.
Kuramo has, however, signalled its intention to spend double that amount by taking up rights snubbed by other shareholders, a move that will significantly raise its ownership in TransCentury.
The disclosure has been made in an information memorandum published in connection with the cash call.
“Kuramo Capital Management LLC, on behalf of its advised funds, has indicated through a letter of intent, their willingness to support the fundraising process by subscribing to its pro-rata 25 per cent rights up to an amount of Sh1.1 billion ($10 million) subject to the regulatory approvals,” said TransCentury.
Kuramo will raise its stake to 48.5 per cent if it spends the Sh1.1 billion target on the rights issue and the remaining units are taken up by other shareholders.
Weak participation by other investors will, however, raise the private equity firm’s ownership beyond the 50 per cent mark.
Kuramo has received approval from the Capital Markets Authority (CMA) to increase its ownership in TransCentury in the cash call without making a buyout offer to minority investors.
“The major shareholder [Kuramo] indicated to the board that, in the event, there are untaken rights/ shares by other shareholders, they may be willing to acquire shares beyond their pro rata allocation in the rights issue so as to help to ensure the success of the rights issue,” TransCentury said in a statement.
“The major shareholder has indicated to the board that they do not intend to initiate a take-over offer as part of any additional shares they acquire beyond their pro rata entitlement in the rights issue.”
Kuramo’s move to double its investment in the cash call comes after TransCentury’s share price fell below the rights issue price of Sh1.1 per share.
This means that it is cheaper to buy shares in the open market compared to the cash call process, potentially making it difficult for TransCentury to hit its target of raising Sh2 billion.
The rights issue opened on December 29, 2022, with the company offering 1.87 billion new shares to shareholders who were on record as of December 13, 2022.
Buying shares on the market is particularly attractive for small investors whose demand can be met through the daily trading volume.