NIC is looking at the option of issuing bonus shares after concluding the rights issue. FILE
By David Mugwe
IN SUMMARY
The company said that it is also looking at the option of issuing bonus shares after conclusion of the rights issue which is scheduled to close on Friday this week.
Issuing bonus shares, which is just like giving a non-cash dividend, gives investors an added incentive to participate in the rights issue.
Last month, the insurer disclosed that it was considering cross-listing on the Nairobi Securities Exchange (NSE) to increase liquidity of its shares.
Uganda’s National Insurance Corporation (NIC) is exploring a bonus share issue, which could sweeten its ongoing cash call to shareholders.
NIC, which is Uganda’s largest privately held insurer, has some Kenyan shareholders having opened up its 2010 initial public offering (IPO) to locals.
The company said that it is also looking at the option of issuing bonus shares after conclusion of the rights issue which is scheduled to close on Friday this week.
“Options for increasing the capital of the company include among others, a bonus issue in 2014 immediately following the rights issue. The necessary approvals for a bonus issue will be sought from shareholders and regulators if this option is selected,” said Remi Olowude, NIC chairman in a statement.
Last month, the insurer disclosed that it was considering cross-listing on the Nairobi Securities Exchange (NSE) to increase liquidity of its shares.
READ: Uganda’s NIC in plan to cross-list at Nairobi bourse
Issuing bonus shares, which is just like giving a non-cash dividend, gives investors an added incentive to participate in the rights issue.
Last year, NSE-listed CfC Stanbic and NIC Bank promised dividends and bonus shares to attract investors and attain a full subscription for their rights issues.
Rights issues ordinarily have a diluting effect on shareholders because they raise the supply of shares and the promise of a bonus or dividend could encourage investors to hold on to the stock and increase demand.
The Uganda Securities Exchange listed insurer is seeking to raise Ush8.4 billion ($3.3 million) through the sale of 323.1 million shares at Ush26 ($0.01) in the ratio of four shares for every five shares held.
The money will be used to help in its expansion, automation of its processes, rebranding and provision of working capital. Part of the funds raised will also be used to separate its life business from its non-life business in compliance with regulatory requirements.
The shares are being offered at a 25.71 per cent discount to its last traded price of Ush35 ($0.01) at the USE, a price that has been sustained throughout the rights issue.
Its main shareholder, Industrial and General Insurance Company Limited (IGI) of Nigeria which owns 60 per cent of NIC through Corporate Holdings Limited has said it intends to take up the rights which it is entitled to.
A minimum of 40 per cent of the rights issue or 129.24 million of the 323.1 million shares on offer must be accepted for the cash call to be declared a success, the cash call very high chances of success.
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