Kuramo Capital, the private equity firm, plans to invest up to KES 1.1 billion in TransCentury’s ongoing rights issue, increasing its stake in the company to more than 48%.
Kuramo currently owns 25% of the infrastructure investment firm, or 93.7 million shares, entitling it to purchase 468.8 million additional shares at the set price of KES 1.1 per share. This amounts to a KES 515.7 million investment in the cash call under normal entitlement, which will defend its stake in the company.
Kuramo, on the other hand, has indicated its intention to spend double that amount by acquiring rights passed up by other shareholders, a move that will significantly increase its ownership in TransCentury.
The information was disclosed in an information memorandum published in conjunction with the cash call.
“Kuramo Capital Management LLC, on behalf of its advised funds, has indicated through a letter of intent, their willingness to support the fundraising process by subscribing to its pro-rata 25 per cent rights up to an amount of KES 1.1 billion ($10 million) subject to the regulatory approvals,” said TransCentury.
Kuramo’s stake will rise to 48.5 percent if the KES 1.1 billion target for the rights issue is met and the remaining units are purchased by other shareholders.
However, a lack of participation by other investors will push the private equity firm’s ownership above 50%.
Kuramo has been granted permission by the Capital Markets Authority (CMA) to increase its ownership in TransCentury through a cash call without making a buyout offer to minority investors.
“The major shareholder [Kuramo] indicated to the board that, in the event, there are untaken rights/ shares by other shareholders, they may be willing to acquire shares beyond their pro rata allocation in the rights issue so as to help to ensure the success of the rights issue. The major shareholder has indicated to the board that they do not intend to initiate a take-over offer as part of any additional shares they acquire beyond their pro rata entitlement in the rights issue.”TransCentury said in a statement.
Kuramo’s decision to double its cash call investment comes after TransCentury’s share price fell below the rights issue price of KES 1.1 per share.
This means that buying shares on the open market is less expensive than using the cash call process, which could make it difficult for TransCentury to meet its KES 2 billion target.
The company launched the rights issue on December 29, 2022, offering 1.87 billion new shares to shareholders on record as of December 13, 2022.
Buying stock on the market is especially appealing for small investors whose demand can be met by the daily trading volume.