TransCentury opts to leave the bourse

Loss-making investment firm TransCentury #ticker:TCL is seeking to delist from the Nairobi Securities Exchange (NSE), saying it needs to meet a precondition for accessing new capital from private equity funds.

The proposal to take the company private will be put to a shareholder vote at an extraordinary general meeting to be held via electronic means on July 30.

If successful, the move will close the chapter on Transcentury’s nine-year life as a publicly traded firm during which it has lost Sh12.6 billion or 95 percent of its market value.

It would join eight other firms that have gone private in recent years, mostly through takeovers, including oil marketer KenolKobil and motor vehicle dealer CMC Holdings.

For TransCentury’s 1,600 retail investors, going private means loss of access to trading liquidity afforded by the NSE.

“The focus now remains attracting funding that is aligned to the group strategy to be able to realise full value from opportunities at hand,” TransCentury said in a statement.

“A significant source of such capital, however, remains unavailable to the business while it remains listed, including the fast-growing pools of sector-specific capital targeting private/ non listed businesses.”

The company did not say how much of new capital it is seeking to raise and the identity of investors willing to provide the cash once it goes private. The prospective investors, however, want to fund TransCentury as a private firm to avoid reporting and regulatory requirements that apply to listed companies.

The resolution to take the company private will need the approval of most of the company’s shareholders to succeed.

Kenya’s securities law says that a delisting resolution can be passed by a simple majority at a meeting where shareholders with a combined stake of at least 75 percent are represented in person or through proxies.

Such a resolution can nonetheless be nullified if investors with a 10 percent equity or more vote against it. It remains to be seen whether TransCentury will also seek the delisting of its major subsidiary East African Cables, which traded on the NSE yesterday at Sh1.95 per share, giving it a market capitalisation of Sh493.5 million. TransCentury’s delisting plan has the backing of its controlling shareholder, private equity firm Kuramo Capital, which acquired its 24.9 percent stake in April 2017 for $20 million (Sh2.1 billion).

The company raised the funds from Kuramo to help pay off part of its Sh6 billion bond, which it had issued in Mauritius shortly before listing on the NSE on July 14, 2011.

Significant shareholders include TransCentury’s founders Michael Waweru, the former Kenya Revenue Authority commissioner-general, with a 5.6 percent equity, Anne Gachui (5.6 percent) and Zephaniah Mbugua (3.1 percent).

The original shareholders held a combined stake of 71.2 percent when TransCentury listed on the NSE but later got diluted from the entry of Kuramo and bondholders who converted part of their claims into shares.

Investment banker Jimnah Mbaru was among the company’s founders but he offloaded his shares between 2013 and 2015 for an estimated Sh260 million.