Paint manufacturer Crown Paints gets greenlight to issue additional shares to fund expansion

KENYA – Capital markets regulator Capital Markets Authority of Kenya (CMA), has given the nod to Crown Paints Kenya Plc to raise US$6.7 million from shareholders via purchase of additional shares.

The regulator, in a statement, said it had approved the firm’s bid to issue and list 71,181,000 new ordinary shares on the Nairobi Security Exchange (NSE).

“The rights will be issued on the basis of one new ordinary share for every one existing share,” noted CMA.

The additional funds raised will boost the company’s financial flexibility to navigate through a tough business environment brought about by the Covid-19 pandemic.

It would also boost the firm’s growth strategy according to the information memorandum.

“The group’s management plans to use the rights issue funds to facilitate the development of new products, retiring of current facilities and funding regional expansion,” CMA said in a statement.

Wyckliffe Shamiah, the CMA chief executive observed that the disclosures made on the rights issue comply with the capital markets regulations and will enable investors to make an informed decision.

Mr Shamiah noted that the regulator had reviewed the application for exemptions from complying with Regulation 4 of the Capital Markets (Take Over and Mergers) Regulations, 2002 of Kenya concerning the intention of the company’s major shareholders, who have undertaken to take up their full rights entitlements.

“They are also willing to take more than their initial entitlements subject to availability during the rights issue,” said Shamiah.

“The group’s management plans to use the rights issue funds to facilitate the development of new products, retiring of current facilities and funding regional expansion”

Capital Markets AuthorityKenya

Crown Paints is expected to make bi-annual updates to CMA on the use of the proceeds of the rights issue.

While the paints maker’s business outlook in Kenya is secure, its subsidiaries in Tanzania, Uganda and Rwanda have had a sluggish performance.

The Kenyan operation has been supporting these subsidiaries.

In November 2020, wrote off a total of US$6 million it had invested in its subsidiaries in Uganda and Tanzania, which are in losses, according to its annual report for the year ended December 2019.

During the year ended December 31, 2019, a provision of US$6 million was made, being impairment in subsidiaries, the company said in the report.

The move saw the value of its investment in the subsidiaries drop to US$10 million in the review period from US$17 million a year earlier.

The company wrote off US$2.6 million in Regal Paints Uganda and US$3.4million in Crown Paints Tanzania.

The value of Crown Paints Rwanda increased and there was no impairment in the subsidiary.

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