Nairobi.  Kenyan investors will be locked out of the upcoming sale of Precision Air, a subsidiary of national carrier Kenya Airways which is expected to list at the Tanzanian bourse next month.

Kenya Airways chief executive Titus Naikuni said the Precision Air shares will be sold only in Tanzania in the upcoming initial public offering (IPO) of the country’s biggest airline.

“The IPO is scheduled to be carried out in Dar-es-Salaam only as it is a Tanzania registered company,” said Mr Naikuni in a statement.

Precision Air currently has two shareholders; Michael Shirima—a Tanzanian who founded the company and owns 51 per cent shares and Kenya Airways (KQ), which owns 49 per cent.

Pricing of the $28 million (Sh2.4 billion) IPO will be announced later this month after regulatory approvals.
The recently concluded Rwandan brewer Bralirwa’s IPO, the Safaricom offer and Stanbic Uganda’s share sales were floated in all East African Community countries.

Tanzania, which is a member of the regional economic grouping, but has restrictive capital flow rules, has not allowed its nationals to participate in the IPOs.

Mr Naikuni said 65 per cent of Precision Air unissued stock—about 55 million shares—will be on sale with funds to be used to finance expansion of the Tanzanian airline.

“Funds generated from the IPO have been earmarked primarily for capital expenditure to facilitate expansion of Precision Air into a regional carrier as well as modernisation of the airlines’ equipment,” said Mr Naikuni.

The expected share price for IPO will be  50 US cents or 756 Tanzania shillings.

Kenya Airways’ shareholding in Precision Air after the IPO will be diluted to 34.2 per cent.

The KQ boss said Precision Air remains a strategic investment for the national carrier’s regional business.

Last year, the Tanzania subsidiary generated revenues of Sh5.3 billion out of which KQ earned Sh77 million as its share of the associate company’s profits.

This was an improvement from the 2008/09 revenues of Sh4.6 billion and profit share of Sh62 billion, and the 2007/08 turnover of Sh3.2 billion and profit share of Sh66.3 million.

Mr Naikuni said an increased footprint for Precision Air will give KQ’s customers access to more destinations and at higher frequencies.

The Tanzanian firm is planning to ride on the increased demand for air travel in Africa and the region in particular by injecting more funds into its operations.

Analysts say they would have expected the shares to be sold in both Kenya and Tanzania given the fact that KQ is a Kenyan company and the coming into effect of the common market in July 2010.

Last July, Precision Air said it would conclude the IPO by the end of 2010, but this did not happen as the markets regulator had not approved the listing.

 (Business Daily)

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