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Bid to block KQ's Rights Issue flops

By | Apr 14th 2012 | 2 min read


Effort by a businessman to stop the Kenya Airways rights issue has flopped.

The High Court yesterday declined to suspend the rights issue involving the listing of 1,477,169 new shares. But the court certified a case filed by Mr Rakesh Gadani as urgent and ordered him to serve KQ with the suit papers.

Justice Fred Ochieng’ said he should serve the airline and the case heard inter partes on April 17.

Rakesh wanted the airline directors temporarily stopped from offering the shares at Sh14 or listing them at the Nairobi Stock Exchange, pending hearing and determination of the case.

The case was filed on grounds that existing shareholders who cannot exercise their rights could lose 66 per cent of the value of the shares.

"In essence, one is being forced to give up Sh28 per share (two third of the value)," he argued.

KQ intends to raise Sh20.7 billion by way of the rights issue of new ordinary shares.

He stated the offer price represents a discount of 32.2 per cent to the average price as traded on the NSE over the last three months prior to the Rights Issue.

Price factor

"Current shareholders have not had the chance to question the board of directors to explain the logic behind selling shares at Sh14 when the net asset value is Sh42," he added.

On Friday, his lawyer Stephen Gitonga told the court the issuance of shares is oppressive to his client and minority shareholders.

Kenya Airways (KQ) received the green light to float a rights issue to enable it meet additional capital requirements related to expansion and acquisition of additional aircraft.

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