Tanzania’s Precision Air IPO undersubscribed


Tanzania’s Precision Air has sold less than half its initial public share offering, with brokers saying investors were keeping their cash for a share placement from Tanzania Breweries Limited (TBL).

Tanzania’s biggest airline was seeking to raise close to 28 billion shillings ($16.5 million) from the IPO for modernisation and expansion of its fleet, but managed to collect just 11.84 billion shillings.
“The IPO was undersubscribed largely because investors were not comparing Precision Air with another airline — they were comparing it with TBL, which appeared to be more attractive to some of the investors,” Laurean Malauri, chief executive of Orbit Securities, sponsoring broker for the IPO, told Reuters.
“The fact that there were delays in getting approval from Kenya’s stock market regulator has led to a negligible participation of foreign investors in the IPO. By the time the approval came, it was too late for Kenyan investors to participate.”

Precision Air’s IPO ran from Oct. 7 to Nov. 4, and the sale of East African Breweries Limited’s (EABL) 20 percent stake in TBL started on Nov. 4 and is due to close on Nov.25.

The airline had set aside up to 49 percent of the 58.8 million shares on offer to foreign investors.

Before the IPO, Kenya Airways owned 49 percent of the airline, with the remaining majority stake owned by Michael Shirima, chairman and founder of the airline. Kenya Airways’ stake was not part of the share sale.

Existing shareholders will see their stakes diluted after the IPO, with Shirima holding 35.52 percent of the firm, Kenya Airways 34.13 percent and the public 30.35 percent.
“The IPO was still a success, because the aim was to increase public ownership of the airline, and retail investors were the majority of the buyers,” said Malauri.
“Precision Air is working on another financing plan to meet the funding gap after the under subscription … They have alternative plans to raise funds, such as private financing and others.”

A statement issued by Precision Air’s Managing Director, Alfonse Kioko, seen by Reuters on Wednesday, said a total of 6,667 investors participated in the IPO.
“The participants were mostly domestic retail investors and some Tanzanian institutions,” he said.
“The airline has submitted a financial plan to relevant authorities outlining how the funds raised (from the IPO) would be invested and strategies of filling the (financing) gap to ensure the airline’s goals are successfully met.”

Kioko said Precision Air would be listed on the Dar es Salaam Stock Exchange as initially planned on Dec. 15.

EABL launched a 121.51 billion shilling placement of its stake in SABMiller’s Tanzanian unit at a premium to its last traded share price.

Brokers said EABL’s offer was 12.4 percent higher than the most recent closing price of TBL’s shares on the Tanzanian bourse.

SABMiller owns 52.83 percent of the shares in Tanzania’s biggest beer maker.

TBL, which controls about 70 percent of the beer market in Tanzania, was listed on the DSE in 1998 at an offer price of 550 shillings per share.