[2008-06-20]  KCB rights issue opens door for foreign investors
A new door has emerged for foreign investors who missed out on full allocations during the recent Safaricom Initial Public Offering. The opportunity is in the form of the KCB rights issue, set to roll out on Monday.

With the government expected to sit out of the rights, and retail investors having no tradition of taking up the rights, foreign and institutional investors willing to take positions on the fast changing Kenyan opportunity have a golden chance.

The prospectus for the rights released yesterday avers as much. “The CMA currently allows up to 75 percent of a company listed on the NSE to be owned by foreign investors. It is possible that foreign investors may take up a substantial portion of the rights,” the offer document says.

Foreign investors own about 10 percent of the bank. Apart from the high headroom they have on the regulatory front, the opportunity is made more enticing by the fact that the KSH5.5 billion issue has no underwriter.

This is the second time the bank is using the financing method to raise funds after raising KSH2.45 billion in 2004. In 2004, the bank had initially targeted to raise KSH1.5 billion but there was enthusiasm from investors outside the then existing pool of shareholders in the bank. During that exercise, only a third of existing shareholders took up their rights.

“Most small investors did not take up their rights in 2004. Some may have failed to do so because of lack of awareness or ignorance,” said Job Kihumba, executive director at Standard Investment Bank which, together with Faida Investment Bank, are offering transaction advisory services for the offer.

Many foreigners were allocated only 31 percent of their wish in Safaricom and may find the bank’s rights issue handy. Shareholders will buy rights at KSH25, a discount of two shillings on the average weighted price of KSH28 per share for the six months ending April 30 this year.

Since the cut off date, the average price has been mostly above KSH30 and was yesterday trading at KSH32 per share. The government may hesitate to take up its rights in view of its resolve to withdraw from non strategic commercial enterprises. It did not take up its rights in 2004 citing the very reason.


Although Investment Secretary Esther Koimett was not available to shed light on the position, the prospectus anticipates the government not to take up the rights.

“There may be substantial untaken rights that may or may not come to the NSE for trading either because the large shareholders are unwilling to take up their rights or tens of thousands of individual shareholders may not respond to the offer.”

Untaken rights
It went on to say that KCB had put in place a mechanism to deal with the untaken rights. The offer consists of nearly 222 mn shares in the ratio of one new ordinary share for every nine such shares already held.

For purposes of the issue, the record register closed on June 4 but the upload of the issues into the CDSC system as well as the sending of provisional allotment letters took place on June 13.

Commencement in trading of the rights starts at 9am on June 23 and the last date of immobilisation of provisional rights takes place at 3pm on June 30. The last date of renunciation by way of private transfer will be July 11, while the last date for acceptance and payments for the new shares will be July 18.

The announcement for the rights results will be August 8, while the late date for payment to receiving bank for applicants using bank guarantees will be August 14. Share certificates and electronic crediting of CDS accounts will take place on August 15, while the date of listing and commencement of trading of new shares will be August 25.

Source: © Copyright 2000-2007 by Nation Media Group.