DFCU Ltd is seeking to mobilise Ush200 billion ($54.8 million) in a rights issue this month – the largest transaction of its kind on the Uganda Securities Exchange’s history.
But market concerns about the offer price have unsettled some investors while expectations of increased liquidity on the company’s counter appear high after this transaction.
A recent transaction brief issued by African Alliance Uganda – the bank’s transaction advisor – revealed the rights issue carries an offer price of Ush760 ($0.21) per share compared with a current average trading price of Ush758 ($0.2).
The rights issue bears an allotment ratio of 0.53 to one rights share out of a total of 263,157,895 new shares on offer. The transaction will raise DFCU Ltd issued shares from 497,201,822 to 760,359,717 shares.
The bulk of the funds raised will be deployed towards clearing a $50 million loan recently obtained from Arise B.V, the company’s majority owner with 55 per cent shares, and recapitalisation of its balance sheet following its acquisition of Crane Bank in January.
The rights issue will open on September 4, and close on September 25.
Under absorption Local stockbrokers feel the transaction risks under absorption as retail investors opt to purchase cheaper shares on the stockmarket.The DFCU rights issue is a major departure from previous rights issues of companies trading on the USE, which offered discounted prices.The transaction advisor is therefore banking on the company’s investor profile to spur uptake of new shares in light of steady institutional interest witnessed on its counter