Tanzania Oxygen seeks $52m in rights issue

A trader monitors trading on the Dar es Salaam Stock Exchange. FILE 

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.

READ: Uganda insurer unveils $3.3m cash call

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).