Egyptian firm raises stake in Rift Valley Railways buy-out deal

RVR’s Mombasa-Kampala-Juba-Cairo route offers competition to the proposed Lamu Port South Sudan Ethiopia Transport corridor. [PHOTO: FILE]

By MACHARIA KAMAU

NAIROBI, KENYA: Egyptian private equity firm Citadel Capital has completed a $530 million (Sh45.6 billion) purchase of additional shareholding in its subsidiaries in Africa including  Rift Valley Railways (RVR). 

This comes as it prepares to work on a major transport corridor project connecting East Africa to Cairo through Kampala, Juba and Khartoum. The Cairo-headquartered company said it had acquired additional stakes in different companies throughout the region where it has shareholding.

MAJORITY STAKES

“Citadel Capital today completed its planned purchases of additional stakes in its platform companies totalling Egyptian Pounds 3.7 billion (Sh45.6 billion) as part of its ongoing transformation into an investment company that will hold majority stakes in its subsidiaries in five core industries – energy, transport, agrifoods, mining and cement,” said the firm in a statement yesterday.

The buy-out is likely to affect the ownership structure of RVR, where the firm has a controlling stake of 51 per cent shareholding. RVR holds the concession for running the Kenya-Uganda Railway. TransCentury, the other major shareholder in RVR, said in January it had exercised an option that would affect its shareholding in RVR. “At a meeting held on February 13, 2014, Citadel Capital’s board accepted a report by its independent auditor (KPMG) certifying Egyptian Pounds 3.7 billion ($530 million) in liabilities to co-investors and shareholders arising from these securities purchases.

“These liabilities will be capitalised during the second subscription round for the capital increase, thereby resulting in full subscription to the share issuance,” it added. 

Last December, Citadel Capital shareholders approved a plan to increase the firm’s total issued capital to Egyptian Pounds 8 billion ($1.2 billion) from Egyptian Pounds 4.4 billion through the issuance of 728 million new shares. This was approved by the Egyptian Financial Supervisory Authority on December 1 last year and made public on December 4.

The closing date for the first round of subscriptions took place on February 13. The second round is expected to be completed next month.

CO-INVESTORS

The funds drive is expected to give the company a war chest in its acquisition of stakes in its subsidiaries. But in its January statement, TransCentury did not indicate if it would increase its stake in RVR. It is likely to be among co-investors selling part of their stake to Citadel.

“TransCentury Ltd would like to announce that its wholly owned subsidiary company, Safari Rail Company Ltd, has exercised an option that will result in a change of its shareholding in KU Railways Holdings Ltd (the firm’s lead investor in Rift Valley Railways),” said the firm in the late January cautionary statement.

The money may also go to enhancing an inland trade route connecting Cairo to Mombasa, where Citadel has made huge investments in both rail and water transport.

The company last December said it planned to create a route connecting East African countries to Egypt through South Sudan and Sudan. Cargo moving on the route will use both rail and water transport.

Citadel has a shipping company that operates on the Nile. The route could offer speedier movement of goods within the Comesa trading block and also serve as an alternative route for exporters and importers into the EAC. It would help movement of goods to and from the Middle East and Europe to EAC, and from the region to Egypt using the country’s port cities to move them onwards to Arabia and Europe by sea.