By SAMUEL NJIHIA, The EastAfrican
In Summary
- Existing shareholders offered 18.6 million shares to fund expansion.
Dar es Salaam Securities Exchange (DSE) listed
TOL Gases Ltd, commonly known as Tanzania Oxygen, is seeking to raise
Tsh84.5 billion ($52 million) through rights issue, which kicked off on
November 26.
The rights issue is the latest in a string of
other offers by listed firms across the East African region, opening a
new income stream for investors keen to ride on improved performance of
the bourses.
TOL joins Kampala bourse listed National Insurance
Corporation (NIC) and Kenya’s power generator, KenGen as the latest
firms, which have turned to rights issues to raise funds for expansion. A
rights issue is a way of raising cash by offering shareholders stocks
in proportion to their current holdings.
TOL, the industrial and medical gas manufacturer
said the funds will be raised through the sale of 18.6 million
additional shares to the existing shareholders whose names appeared on
its shareholders’ register at the closure of register on November 22.
Investors will get one new share for every two
existing shares and the closure date for those who want to participate
in the rights issue is December 31.
The shares are offered at 22.6 per cent discount to its last traded price of Tsh310 ($0.19) on November 22.
“Any rights not exercised will lapse and will be
available for subscription to other existing shareholders of TOL Gases
Ltd,” Tanzania Securities Ltd (TSL), a member of the DSE, said in a
press statement.
The funds sought through the cash call will be
used to finance the firm’s expansion plans, which include renovation of
its Aspen plant and the commissioning of a new one.
“The amount of funds that will be obtained from
the rights issue will be spent on major refurbishment of the Aspen 1,000
plant and to finance the purchase of other associated equipment, as
well as the commissioning of the Argon plant,” read the statement.
As central bank rates continue to drop across the
region, the cost of borrowing is also expected to drop. Part of this
money is likely to find way into stockmarket where trading in stocks
rises when interest rates fall as investors shun bonds. This creates a
favourable environment that companies can exploit to raise funds for
expansion.
Tanzania Oxygen, the first company to list on the
DSE in 1998, posted Tsh1.37 billion ($856,000) in pre-tax profit in 2012
compared with Tsh409.95 million ($256,246) in 2011 — returning to
profitability after suffering accumulative loss of Tsh2.9 billion ($1,8
million) in 2008, 2009 and 2010.
The cash call comes barely a fortnight after NIC
announced it would be seeking to raise Ush8.4 billion ($32.3 million)
through a rights issue that kicked off last week.
NIC said the funds would be raised through the
sale of additional shares to existing shareholders from November 22
through December 13.
“The size of the rights issue is Ush8.4 billion
($3.3 million) and the rights issue price is Ush26 ($0.10) per new
share,” NIC chairman Remi Olowude said in a statement. The NIC shares
are being offered at a 25.71 per cent discount to its last traded price
of Ush35 at the Uganda Securities Exchange (USE).
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