Minority shareholders of listed investment firm TransCentury will not be edged out after the Capital Markets Authority blocked a majority takeover.
CMA has blocked majority shareholders from initiating any potential takeover of the firm.
The regulator's exemption order stands despite the majority shareholder, Kuramo Capital, having the option to acquire additional stakes beyond their current share allocation of 25 percent.
In the event of untaken shares by other shareholders Kuramo Capital is free to increase its grip on Transcentury.
This comes at a time the listed firm is in the market to fundraise for Sh2billion through a rights issue to ease its financial burden.
“The company is pleased to announce that on 27th April 2022 the CMA granted the request for the takeover exemption thereby allowing the major shareholder to acquire shares beyond their pro rata allocation should the shares be available during the Rights issue,” TransCentury Secretary Virginia Ndunge said in a notice.
The fundraiser is aimed at settling creditors debts, repaying part of the holding company debt owed to lenders and in return unlocking additional working capital for financing the Group and its subsidiary businesses with the rights issue.
Last month, the loss-making firm sought to raise over Sh2.06 billion through rights issues after settling for an offer price of Sh1.10 per unit, which is now higher than the Sh0.87 per share prevailing trading price at the Nairobi Securities Exchange (NSE) as at Tuesday this week.
TransCentury will raise the new capital from investors after it listed 1,876,013,830 new ordinary shares.
The shares to trade at Sh1.10 per share will see the rights issued based on five new ordinary shares for every existing share held by each shareholder.
Increasing shareholding in a company has always given the share owners an upper hand during mergers and acquisitions of companies.
Currently Kuramo Capital is the anchor shareholder with a 25 per cent stake, while the remaining ownership is distributed among an estimated 1,800 holders, comprising individual and institutional investors.
However, Kuramo has already indicated that it does not intend to initiate a take-over offer as part of any additional share they acquire beyond the existing 25 per cent stake.
Cash-strapped companies can turn to rights issues to raise capital by allowing existing shareholders to purchase new shares at a discount compared to the market trading price.
The firm’s stock price has been shedding off in recent weeks, with its current stock now retailing at a lower price than the previously discounted price offered.
This means TransCentury might struggle to hit the Sh2.06 billion capital target since investors have the option of cheaper open market prices offered at the Nairobi bourse.
