Express Kenya chief executive Hector Diniz is set to raise his ownership of the company to slightly over 70 percent if shareholders approve a plan to convert Sh80 million debt owed to his companies into shares.
The transaction, subject to a shareholders’ vote at an extra-ordinary general meeting set for June 6, will see Mr Diniz -- through his two firms -- issued with nearly 12.31 million new shares at a price of Sh6.50 each.
This will be achieved through conversion of Sh42 million debt that the loss-making firm owes Airport Trade Centre Ltd (ATCL) and another Sh38 million loan to Diniz Holdings Ltd into shares.
Mr Diniz – who already controls a 61.64 percent stake in the clearing and forwarding, warehousing and logistics services firm – failed in a bid last year to buy out 38.36 percent equity held by minority shareholders.
The new proposal, which will give him an additional 10 percent stake, was cleared by the Capital Markets Authority (CMA) on Friday last week.
“If the proposal is approved by shareholders, ATCL and DHL will be allocated new shares which will be subsequently listed on the Nairobi Securities Exchange,” Express said in a cautionary note to investors on Monday.
“Shareholders are advised to exercise caution when dealing in the shares of Express Kenya PLC as the transaction may have a material effect on the price of the company’s shares.”
The firm’s shares, which averaged Sh6.58 a piece last Friday, did not trade on Monday.
Mr Diniz, in his failed bid to fully acquire the company and delist it from the Nairobi bourse, had made an offer of Sh5.50 per share.
This had been accepted by shareholders with 9.78 percent equity, bringing their total stake to 71.42 per cent, but fell short of the 75 percent minimum regulatory threshold for such a transaction.
A section of the company’s significant shareholders rejected the CEO’s offer after it emerged that the struggling firm was worth much more based on thvalue of its 15.7 acres of land in Nairobi’s Industrial Area.
Mr Diniz had an option of raising his bid or extending the offer period, but decided to let the proposed buyout lapse.
The loans that are being converted into shares have been outstanding for years now.
ATCL, a real estate firm which houses Express Kenya, was owed the same amount (Sh42 million) in December 2014, while DHL’s loans at the time stood at Sh18 million.
This had been revealed in a December 2015 notice in which Mr Diniz unsuccessfully tried to convert the loans into equity for a premium Sh5 per share compared to the then prevailing price of Sh4.30.
Express Kenya, which has not returned profit since 2013, narrowed its net loss for 2018 by 22.8 per cent to Sh69.6 million.