Crown Paints now ditches share buy-back scheme
3 weeks ago, 05:33
Crown Paints has suspended its shares buy-back plan after realising that it will not create any value to the company, the management has said.
The Nairobi Securities Exchange (NSE)-listed paints manufacturer has attributed the move to a market rally, which has made the purchase commercially unviable.
Company finance director Patrick Mwati, Thursday said following the market developments the top echelon sat down and evaluated whether it made commercial sense to go ahead with the proposed buyback plan.
At the announcement the price stood at an exalted Sh57 a share, translating to a price-to-earnings ratio of 30.7 times, 19.4 times that of Safaricom, but has since risen to Sh84.50.
“We realised that we would be buying back shares at a value that is not sustainable. Therefore, we didn’t even do an application to the Capital Markets Authority (CMA),” said Mr Mwati on the side-lines of the firm’s 61st annual general meeting (AGM) meeting in Nairobi.
In June 2017 during the company’s AGM, shareholders authorised the board to purchase a maximum of 10,677,150 ordinary shares, which represented up to 15 per cent of the issued share capital as quoted on the bourse.
This was expected to leave the company with 60.5 million units issued on the NSE and was estimated to cost over Sh600 million.
This was seen as having potential to raise future dividend yields by reducing the market float.
Crown Paints Plc would have become the first listed firm in the country to buy back its own shares.
Prior to the share buy-back approval by shareholders, the board had assured investors the move was not after the minority shareholders’ stake and there were no future plans to delist.
The company’s share register shows that as at April 2018, 59.1 million shares were held by only three shareholders (Crown Paints & Building Products Ltd, Beaumont Property Ltd, and Barclay Holding Ltd), representing 83.11 per cent of the total share volume.
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