Letshego in P500m shares buyback
Staff Writer | Tuesday May 5, 2015 12:35
In a circular to shareholders, the micro-lender said the proposed scheme would see the company buying back 218 million of its issued 2.18 billion shares at a price of an estimated illustrative price of about P2.57 per share.
“The directors do not propose to exercise the share buy back mandate to such extent that it would materially affect the working capital requirements, financial flexibility or investment ability of the Letshego Group.
“The Share Buy Back will not exceed P561.6 million. This amount has been determined on the basis of a purchase of 218.5 million shares at an illustrative price of P2.57 per share,” reads a statement from the micro lender.
Letshego shareholders are expected to vote on the proposed transaction at an annual general meeting to be held in Gaborone on 27 May 2015.
While the proposed share buy back may reduce the amount of distributable reserves available for dividends, the scheme will be a boon for remaining shareholders. This would have the effect of increasing the dividend rate of Letshego through the reduction in the issued and paid-up share capital of the company.
Letshego’s stated share capital would be reduced to 1.97 billion shares from 2.18 billion shares-meaning less shareholders to share the company’s cake.
In the year to December 2014, the micro lender declared a dividend of eight thebe per share.
Once the shares are purchased the Letshego board has resolved to cancel them thus resulting in the reduction of capital.
However, the share buyback is expected to reduce Letshego’s public shareholding spread on the bourse from 76.8% to 74.2%, assuming the shares are purchased from public shareholders other than the company’s existing directors and substantial shareholders.
Botswana Stock Exchange (BSE) rules stipulate that at least 20 percent of a listed entity must be in the hands of public shareholders.
Buoyed by news of the buy back as well as the proposed acquisition of a deposit-taking institution in Tanzania, Letshego share price broke past the P3.0 mark in last week’s trading on the BSE.
The microlender was the largest gainer on the bourse last week as it jumped 16.7 percent to reach a new high of P3.07 since its share split in 2010. On Friday, Letshego released a cautionary update announcing that it had entered into negotiations with a third party in Tanzania to become a 75 percent shareholder in a deposit taking financial institution that specialises in micro finance.
Letshego can however not undertake the share buy back while trading under a cautionary statement, which means the proposed acquisition would have to be wrapped up beforehand. In the 12 months to December 2014, Letshego’s advances to customers were at P5, 7 billion compared to P4, 4 billion recorded in the previous period. The group recorded a profit before tax increase of 24 percent to P970 million. Sixty percent of these profits before tax were generated outside of Botswana. Letshego operates in eight southern and east African countries including Namibia, Mozambique, Kenya, Uganda, Rwanda, Swaziland, Botswana and Lesotho.