Crown Paints will place an order through the Capital Markets Authority (CMA) to buy back a maximum of 10.6 million ordinary shares from existing shareholders on a voluntary basis.
This follows Tuesday’s endorsement by the listed paints manufacturer’s shareholders, giving the directors permission to initiate a buy-back of its shares in the market.
This will leave the company with just 60.5 million units issued on the Nairobi Securities Exchange (NSE), and may cost the firm over Sh600 million . It will potentially raise future dividend yields by reducing the market float.
Crown Paints Group chief executive Rakesh Rao addressing shareholders during the company’s 60th annual general meeting in Nairobi said if no shareholder are willing be to sell back shares to the company, there will be no transaction.
“We are not forcing anybody to sell shares, as a shareholder you have an option. We shall give a notice through CMA that Crown Paints want to buy this number of shares at this price between this and that date,” said Mr Rao.
Mr Rao said the share buy-back was not after the minority shareholders’ stake and there were no future plans to delist. Prior to the approval of share buy-back, several shareholders voiced reservations that majority shareholders were planning to buy out minorities.
According to the company’s share register 58.2 million shares are held by only four shareholders, which represents 81.77 per cent of the total share volume.
The company’s finance director Patrick Mwati said Crown Paints Kenya Plc will be the new shareholder of the purchase shares, and they will cancel what they will be acquired from the list of shareholders.
Mr Mwati said the current capital structure of the shareholding requires that the management releases some of the reserves, and that’s why they opted for a share buy-back to improve earnings per share in future.
“The future will be bright for those people who will remain, and at present will be brighter for those people who will opt out,” said Mr Mwati.