Thursday, September 15, 2011

Tanzania's Precision Air targets IPO for expansion

  • Funds raised to be used for expansion
  • Airline eyeing routes on Angola, Malawi, Zambia


Tanzania's Precision Air plans to raise around 28 billion shillings ($17.1 million) in an initial public offering next month after getting the regulatory nod for the share sale, its brokers said on Thursday.

Precision Air's chief executive told Reuters the money raised from the IPO would largely be used to finance the airline's fleet and route expansion plans.

"Much of it will go to expansion by acquiring more aircraft and acquisition of spares, which are critical for the operation of the airline," Alfonse Kioko said, adding that he expected the IPO to be oversubscribed.

Kioko said apart from its domestic routes, the airline currently operates flights to Kenya, Uganda, South Africa and the Comoros.

"We plan to expand to central and southern Africa, then look at west Africa before moving on to the Middle East and Asia," he said.

"We are currently looking at Luanda in Angola and Lubumbashi in the Democratic Republic of the Congo (DRC). Other areas also under consideration are Lusaka (Zambia) and Malawi," he said.

Subscriptions to the issue of 58,841,750 shares run Oct. 7-28, said Orbit Securities, sponsoring broker for the IPO.

Precision, which is 49-percent-owned by Kenya Airways , is the east African country's biggest airline and has set an IPO price of 475 shillings per share.

Orbit Chief Executive Laurean Malauri said foreigners would be allowed to buy the shares, which are expected to be listed on the Dar es Salaam Stock Exchange (DSE) on December 8.

"Precision Air has a local market share of around 65 percent and we expect the IPO to be fully subscribed ... There is a lot of appetite in the market," he said.

Investors are also setting their sights on the cross-listing of African Barrick Gold (ABG) and an IPO in October arising from the sale by East African Breweries of its 20 percent stake in Tanzania Breweries Ltd .

Precision Air Chairman Michael Shirima, who owns a 51 percent stake in the airline, started the company in 1993, offering charter services with a five-seat Piper Aztec plane.

The firm operates daily flights to several domestic and regional destinations.

Existing shareholders will see their stakes diluted after the IPO.

"The local investor will remain, with 35.52 percent of the shares, Kenya Airways will hold 34.13 percent and the public will own a 30.35 percent stake," said Malauri.


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