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Kenyan bank closes rights issue

NAIROBI, Kenya, Jul 23 – The Kenya Commercial Bank (KCB) Group’s Sh15 billion rights issue has closed.

Job Kihumba the Executive Director of Standard Investment Bank which is the lead sponsoring stockbroker told Capital Business they had seen a significant increase in the number of applications as many investors rushed to take up the offer between Thursday and Friday.

“Today is the last day and it is very important. Unfortunately Kenyans tend to do things the last minute and so since yesterday (Thursday), we have started seeing traffic increasing and today will actually be the climax in keeping with Kenyans’ tradition of going the last day,” he said.

Although the rights issue is the largest in Kenya and the region, he expressed confidence that the transaction will be successful.

“It’s no doubt that it is a major project; raising Sh15 billion is not a joke but we are optimistic that it will be successful,” he said.

The bank had offered 887.1 million new shares from July 1 to eligible shareholders at the ratio of two new shares for every five ordinary shares at a discounted price of Sh17.

Last Friday, Standard Investment Bank announced that 120 million government rights had been taken up at the Nairobi Stock Exchange, a move that the bank said was an indication that there was investor confidence in the issue and their strategy. 

According to the Information Memorandum, the tallying is scheduled to begin immediately after the issue closes so as to pave way for the allotment and eventual announcement to be made on August 5.

However, Mr Kihumba said the KCB management would have to decide whether to stick to the date considering that it might be affected by the activities surrounding the August 4 referendum.

“We suspect that that week will be interrupted because of the national referendum. That means that after consultation, we may have to extend (the exercise) by a couple of days to be able to accommodate this. This is so that we can make sure that the tallying of the information and the analysis is done correctly,” Mr Kihumba added.

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Whether the date is changed or not will however not affect the trading of the shares at the regional stock bourses which is slated to commence on August 19.

This is the third rights issue to be offered by the bank after one in 2004 that raised Sh2.3 billion and another in 2008 whose proceeds topped Sh5.2 billion and which is expected to facilitate the institution’s strategy that focuses on consolidating the business in all markets they operate in.

The floating of an additional 887 million shares in their ongoing rights issue has led to a slight dilution of their shares in the market. In the event that all those shares are not taken up, Research Analysts at Kestrel Capital Vimal Parmar said the price might be slightly volatile.

However, Mr Parmar reckoned that the price would stabilise sometime in October around the same time when the bank will be releasing its third quarter results.

“The stability of the share depends on how the referendum goes and if it is not fully subscribed how the management will strategise and deploy the funds that they will raise from the issue,” he added.

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