The incoming strategic investor in Eveready East Africa will need to inject at least Sh145 million to put the company in a viable position based on estimates by the Nairobi Securities Exchange-listed firm.
Eveready says in its latest annual report that it needs to maintain net assets of Sh100 million or more. The battery distributor, however, closed the year ended September 2022 with a deficit of Sh44.5 million.
This was after steady losses gradually wiped out its net assets which had stood at Sh6.3 million in the prior year.
“The company’s objective in managing its capital is to ensure that it supports the development of its business and is able to continue as a going concern, while at the same time maximise the return to its shareholders,” Eveready says in the report.
“The company is required to have shareholders’ funds of at least Sh100 million.”
The strategic investor, Dubai-based InvestAfrica FZCO, is expected to invest more than Sh145 million since it will also buy out the 35 percent stake in Eveready held by the family of the late businessman Naushad Merali.
The 73.4 million shares held through the investment vehicle East Africa Batteries Limited (EABL) will be bought in a private transaction.
This means that the terms of the proposed deal such as the price per share or the aggregate consideration will not be disclosed to the public.
The sellers are, however, expected to be paid a premium to the prevailing market value of Sh116.7 million or a price of Sh1.59 per share in line with other privately negotiated transactions.
Eveready reported a larger loss of Sh17.7 million in the six months to March compared to Sh8.4 million a year earlier.
The performance was due to sales plunging to Sh10.5 million from Sh41.6 million.
Eveready now focuses on the Turbo brand of batteries and its sales have been dwindling steadily, resulting in losses which wiped out shareholder funds.
Eveready says InvestAfrica is expected to put in place measures to improve the company’s financial performance while leveraging its strong household brand and long-term heritage.
The investor will also “leverage on its networks to assist the company in rolling out a turnaround strategy and support the future growth; strengthen capacity to fund investment required to future growth of the company.”
