Crown Paints is set to raise Sh711.8 million through a rights issue, bringing back a form of funding companies that has been absent among Nairobi Securities Exchange-listed firms in recent years.
The company plans to sell a total of 71.1 million shares to existing shareholders, pricing the offer at Sh10 per share.
This represents a 76.4 percent discount to its share price of Sh42.5 on the Nairobi bourse as of Thursday.
Crown says the money will be used to reduce its debt load and turn around the fortunes of regional loss-making subsidiaries that have been depending on the Kenyan parent company to finance their operations.
“The rights issue will specifically enable the company to … secure its balance sheet strength to give it a competitive advantage in a competitive market conditions,” the company said in a notice.
“Allow the company to invest in its subsidiaries which have hitherto made losses so as to retain financial flexibility in line with its long-term strategy.”
Crown added that it will also use part of the funds to manufacture new products such as alcohol-based sanitisers.
The company is proposing to change its Articles of Association to allow majority shareholders or other outside investors to take up additional stakes in the cash call without first making an offer to all the existing investors.
“The pre-emption rights under Article 55 shall not apply where the shareholders have by way of a special resolution authorised the directors to allot and issue shares in the company in a different manner,” reads part of the proposed resolutions for October 30, 2020 annual general meeting.