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Thursday, September 06, 2007

Olympia Capital Holdings Rights Offer - Queries Part 1

Since I posted the earlier blog entry, I have been approached by various readers to explain more about OCHL & its Rights Offer. Due to time constraints, I will address 1-2 issues/topics/questions at a time. Leave the questions in the comments section rather than e-mailing them to me so others may answer/comment on your queries.

The information below is derived from the Information Memorandum. Please download the IM & read it for additional details/information. This is a document the CMA requires firms to produce & should be read by any investor who wants to participate in OCHL's Rights Offer. My comments are in RED.

PURPOSE OF THE RIGHTS ISSUE

The purpose of the Rights Issue is to raise long term funds totaling to an amount of Kshs. 420,000,000 for the following:-

1.To increase OCHL shareholding in OCCL, an associate company listed on the Botswana Stock Exchange.
OCHL used to own 53% of OCCL(Botswana) until April 2007 when OCHL did not participate in OCCL(B)'s Rights Offer. This reduced the ownership to 26%. The reason for the non-participation was the unavailability of funds to buy OCC(B) Rights. OCHL wants to buy 27% of OCCL(B) to equal a shareholding of 50%+ of OCC(B) in order to consolidate the financials.

ii. To fund potential business acquisitions in Kenya. OCHL is already in preliminary discussions with two Kenyan manufacturing companies. This is a strategic move that is going to bring a strong presence of the company in the local manufacturing market to compliment that of local subsidiary.
It should be complement (not compliment) but that aside, OCHL is looking at expanding its footprint in Kenya but acquiring firms in the building industry. Most Kenyan firms in this sector are importers not manufacturers.

OCHL will also undertake marketing of 'Window Accessories" (products of Plush-Yokota) in Kenya through Dunlop Industries Limited.

iii. To fund acquisitions and mergers in South Africa, where the current value chain in the retail housing sector is not complete and the company is forced to partner with others in order to market and sell its products. Therefore to reduce the cost of business and increase trading margins, the company is looking to acquire/merge with companies that can complement the current businesses in both Botswana and South Africa.
OCHL's management has consistently declared their preference for the S.African market which is much larger than Kenya's market. S.Africa & Botswana are part of SADDC that allows for preferential treatment of goods & services within SADDC.

OCC(B)'s involvement is through a PVC tile manufacturing plant (Kalahari Floor Tiles) & window accessories manufacturing & sales (Plush-Yokota). These firms also have "side" businesses including chemicals, uPVC windows & shower doors.

Expansion is likely to be in similar industries i.e home improvement & building materials.

2 comments:

Dexter said...

I'd love to buy the rights offer but my problem is, Safaricom IPO might depress prices of most share. Will buy Olympia after Safaricom. Whats ur take?

coldtusker said...

Dexter: Actually your line of thought raises more questions...

- When will Safaricom's OFS happen?
- Is the govt pushing Safaricom to boost its image among Kenyans (using the happiness factor one gets after the share prices have risen)?
- What allocation will local investors get?