Uchumi rights issue meets high demand
What you need to know:
- The cash call was approved by shareholders in December 2012 but was issued this year. The delay has seen the retailer struggle with supplier debts and shortage of merchandise.
- Uchumi was seeking additional capital to finance its regional growth and expansion as it aims to consolidate its position in regional markets.
- Faida Investment Bank director for corporate finance, David Mataen said Uchumi’s turnaround and growth prospects have won the confidence of investors in Kenya and in the region .
The management of Uchumi Supermarket can breathe a sigh of relief after a cash call to shareholders was heavily subscribed despite a slow start.
The retailer’s rights issue which closed last month raised Sh1.6 billion against a target of Sh895 million representing an 83 per cent oversubscription.
“We are overwhelmed by the level of confidence our shareholders have demonstrated over the period of the issue despite a false start,” chief executive Jonathan Ciano said on Tuesday. Shareholders were buying three new shares for eight held.
The cash call was approved by shareholders in December 2012 but was issued this year. The delay has seen the retailer struggle with supplier debts and shortage of merchandise. It resorted to borrowing working capital.
ADDITIONAL CAPITAL
Uchumi was seeking additional capital to finance its regional growth and expansion as it aims to consolidate its position in regional markets.
Mr Ciano said the money had been earmarked for new branches in Kenya, Tanzania, Uganda and Rwanda, as well as refurbishing local ones.
“We also want to adequately finance working capital for our subsidiaries with a growth in market share and sales volumes,” he said.
The cash call had a slow start last month with the share price even falling below the rights issue.
Mr Ciano blamed the drop on individuals keen on taking over the retail chain.
“You witnessed your company going under. It has paid the debts by denying you dividends. Are we now going to allow somebody else to come and enjoy your supermarket with 40 branches with no debt? No, we cannot do that,” Mr Ciano told the shareholders at last month’s annual general meeting.
Growth prospects
Faida Investment Bank director for corporate finance, David Mataen said Uchumi’s turnaround and growth prospects have won the confidence of investors in Kenya and in the region .
“Uchumi’s current market levels provide a compelling investment opportunity for institutional and individual investors. The participation of these investors is a ringing endorsement of Uchumi’s future and of Kenya’s retail sector as a whole,” he said.
Faida Investment Bank was the lead transaction advisor of the issue.
