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Competition Authority of Kenya approves Kuramo's acquisition in TransCentury stock

By Moses Michira | Dec 18th 2016 | 2 min read
By Moses Michira | December 18th 2016

The Competition Authority of Kenya has approved the acquisition of 25 per cent stake of TransCentury by an American private equity firm.

CAK Director General Wang’ombe Kariuki announced the approval on Friday, to eliminate the last hurdle of the complex acquisition by Kuramo Capital. “It is notified for general information that the Competition Authority of Kenya has authorised the proposed subscription for 24.99 per cent shareholding in Trans-Century Limited by Kuramo Africa Opportunity Kenyan Vehicle Limited,” Kariuki said in the gazette notice published on Friday.

CAK’s approval effectively means Kuramo Capital become the single largest shareholder in the infrastructure company that was started as an investment club by Nairobi-based millionaires — including top banker Jimnah Mbaru. Kuramo Capital invested Sh2 billion in the company which had come under intense financial distress, especially after a loan acquired five years ago fell due in March 2016.

The investment is, however, more than the firm’s current valuation, which has in part been impacted by the sustained bear run in the market and the company’s own troubles such as lower than expected revenues from its most important subsidiaries.

TransCentury was pushed to renegotiate the terms of the Sh8 billion loan, agreeing with the lenders to repay half of it and over a longer period. Shareholders had earlier in August approved the acquisition of the stake by Kuramo in a transaction that was widely viewed as a major bargain in their favour, going by the prevailing valuation of their company.

Analysts had estimated that the new American shareholders of TransCentury would demand up to 65 per cent stake in the infrastructure company for the investment.

Major changes

Standard Investment Bank projected that US’ Kuramo Capital were pushing for a majority stake, considering that their investment was way more than the prevailing value of the company, as measured by market capitalisation at the Nairobi Securities Exchange. “Kuramo Capital controlling stake in TransCentury likely positive. TCL shareholders will be diluted by at least 65 per cent (by our estimates), following the entry of Kuramo Capital Management (Kuramo) into the business,” SIB said in a note to investors following confirmation of the transaction.

Following the financial troubles, TransCentury restructured its finances and consolidated all existing trade finance and term loan facilities of the business across the sub-Saharan Africa into one global facility with African Export-Import Bank.

The entry of Kuramo has already informed major changes in the five-member board, with the exit of three directors, Michael Waweru, Robin Kimotho and Peter Tiras Kanyago. 

Poor results have eroded investor sentiment in the firm that was listed in the NSE at Sh50 a share through introduction, before the steady decline to the current Sh6.90, a nearly 90 per cent value erosion.

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