[2008-06-05]  State ponders its options on KCB rights issue
The Government is yet to decide whether it will take up its shares in a rights issue that KCB Group plans to roll out later this month.

Analysts said the decision is critical not only because it will determine the strength of the Government’s stranglehold on the bank, but also the possibility of opening up an avenue for private investors to increase their stake in the company.

Currently, the State has a 26-percent stake in the bank.

Should the government forgo the rights, its shareholding would go down by nearly five percentage points to 21.67.

This represents 105 million shares of the total 400 million on offer for existing or new shareholders.

The Capital Markets Authority, Central Bank of Kenya and the Nairobi Stock Exchange have given the necessary approvals for the issue.

In 2004, KCB raised KSh2.45 billion through a rights issue although it had initially planned for only Sh1.5 billion.

Rights issues are usually priced at a discount to encourage existing shareholders to buy instead of going to the market. KCB is currently trading at an average of KSh30 on the Nairobi Stock Exchange.

Though rights issues normally push up the share price of the issuing company in the run-up to the opening date, the reverse tends to happen in the post-sale period due to the resulting dilution of shareholding.

Asked whether the government would consider exiting from KCB through a public offer, Finance minister Amos Kimunya said that was an option because there is no compelling reason to do so. The minister, however, said that the sale of the Government’s 22.5 percent stake in National Bank of Kenya is still a target.

He said the issue will be addressed in the upcoming Budget scheduled to be read on June 12.

Government-controlled National Social Security Fund holds 48 percent of the NBK shares.

Mr. Kimunya was speaking at the Treasury when he received a Sh366.5 million dividend cheque from the new KCB chairman, Peter Muthoka.

At another function in the same venue, Mr. Kimunya received a KSh9.5 billion ($150 million) loan from the World Bank towards water projects.

Water and irrigation Minister Charity Ngilu said her ministry would work on a master plan for water based on a study to be conducted later this year.

The minister has in the past stated that she intends to increase the water connections from the current 140,000 to 300,000.

The funds from the World Bank are intended for the Athi, Coast and Lake Victoria North water services boards.

Currently, about 60 percent of Kenyans have access to safe drinking water while access to basic sanitation is at 80 percent.

On inflation, Mr. Kimunya said that food harvests in the coming months would ease the surge in prices which has been witnessed in recent months.

Overall inflation has reached 31.5 percent, according to the latest figures from the Kenya National Bureau of Statistics for May.

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