Bamburi Cement’s share price has gained 17.7 percent following the announcement of the proposed sale of its Ugandan subsidiary for Sh12.7 billion, with investors expecting a potential distribution of part of the proceeds as dividends.
The Nairobi Securities Exchange-listed firm’s stock on Thursday rose to close at Sh26.5 with an above-average volume of 79,000 shares changing hands.
This was up from Sh24.1 on Wednesday and Sh22.5 which was recorded in the prior trade on Thursday last week.
Bamburi on Wednesday announced it has teamed up with its sister company Cementia Holding AG to sell their entire ownership in Hima Cement to a consortium of Sarrai Group and Rwimi Holdings for a total of $120 million (Sh18.2 billion).
Bamburi will receive $84 million (Sh12.7 billion) for its 70 percent stake while Cementia will pocket $36 million (Sh5.4 billion) for its 30 percent stake.
The amount dwarfs Bamburi’s existing borrowings, indicating that the transaction has the potential to significantly boost the company’s profitability and its ability to pay dividends including a special distribution.
The company had a long-term loan of Sh2.3 billion in the half year ended June when its short-term borrowings stood at Sh282 million.
Companies sometimes pay special dividends from sale of major assets or subsidiaries. A recent example is Jubilee Holdings which has paid two special dividends following sale of majority stakes in its general insurance businesses to Allianz SE.
WPP Scangroup also paid a special dividend of Sh8 per share after the sale of its subsidiary Kantar Africa.
For Bamburi, the sale of Hima Cement will also help boost its profitability by focusing on the Kenyan business which posted higher margins.
The company made a net profit of Sh258 million in the year ended December 2022 in Kenya where it reported revenue of Sh20.5 billion.