Top investors boost Sh3.6bn DTB rights issue

Money Markets

Diamond Trust Bank chief executive Nasim Devji (right) with CFO Alkarim Jiwa during the bank’s launch of Sh3.63 billion rights issue at the bank’s offices on Mombasa Road in Nairobi on Monday. Photo/Diana Ngila 

By John Gachiri, jgachiri@ke.nationmedia.com

In Summary

• Aga Khan Fund-linked stakeholders’ pledge to take up offer will rake in at least Sh1.5 billion.
• The rights issue which was launched on Monday will close on July 25.
• The DTB share is being sold at Sh165, a 25.31 per cent discount on the six-month Sh238 average price.

Diamond Trust Bank is on course to raise Sh3.6 billion through its ongoing rights issue after top shareholders said they would defend their stakes.

 

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This means that at least Sh1.52 billion is assured from the cash call given that their combined shareholding is 41.73 per cent.

“Aga Khan Fund for Economic Development and its related companies (Habib Bank Limited, Jubilee Insurance Company Limited, Diamond Jubilee Investment (Uganda) Limited, PDM (Holdings) Ltd), whose total cumulative shareholding comprises 41.73 per cent (as at end of March 2014) of the shares of DTB, intend to take up their rights,” states the bank in an information memorandum for the issue.

Transaction advisers have set Sh1.99 billion or 55 per cent subscription rate as the success level for the rights issue. Take-up by majority shareholders often spurs minority investors to take up their rights.

“The actions of major shareholders have a huge impact on minority shareholders. If they are taking up their shareholding it shows that they are confident in the direction and strategy of the company otherwise they would not look to invest more in the company,” said Genghis Capital associate for transaction services Grace Ndegwa.

The rights issue which was launched on Monday will close on July 25. The DTB share is being sold at Sh165, a 25.31 per cent discount on the six-month Sh238 average price.

The Nairobi Securities Exchange-listed bank intends to use funds raised to grow its asset base, expand branches, develop new products and open shop in new markets by 2020.

“We will do this by building up a wider network of domestic branches and innovative channel delivery channels, as well as expanding outside our core East African markets,” said Diamond Trust Bank chief executive Nasim Devji.

READ: DTB charts new expansion path for Kenya banks

Democratic Republic of Congo, Rwanda, South Sudan, Mozambique and Madagascar are the new markets that the bank is looking to enter.

Chief finance officer Alkarim Jiwa, however, said that the opening of branches in new markets would be subject to feasibility studies and regulatory approvals. The bank has carved a niche in lending to small and mid-size companies.

However, the lender is now targeting smaller businesses that require funding of between Sh100,000 and Sh200,000.

Diamond Trust Bank’s last rights issue was in 2012 when it raised Sh1.8 billion. The funds were also used for expansion. Over the last five years the bank’s balance sheet has grown to Sh166.5 billion in 2013 up from Sh66.76 billion in 2009.

The bank joins National Bank of Kenya and NIC Bank that are raising cash through rights issues this year.

Standard Investment Bank and Kestrel Capital were the lead transaction advisers and sponsoring brokers while Apex Africa Capital is the co-sponsoring broker.