Nation Media Group (NMG) has kicked off a debut stock buyback plan in East and Central Africa by setting out to buy back 10 percent (20.7 million shares) of its issued and paid-up share capital in less than three months. The company, which is listed on the Nairobi Securities Exchange (NSE), becomes the first corporate to implement the share buyback option after the provision was incorporated in the Companies Act, 2015.
Corporate share buyback is repurchasing of shares by the company that issued them.
This concept is common in the United States and Europe, and Kenya was looking to be among the pioneers of this financial engineering in East and Central Africa.
Under this arrangement, an investor who chooses to sell shares back to the company benefits from a ready buyer willing to take the stocks at a premium. In the US, it is estimated that over 80 percent of the 500 companies constituting the S&P stock index buy back shares.
On June 28, NMG, with operations in Kenya, Uganda, Tanzania, Rwanda and Burundi started buying back its shares through the NSE at a price of Ksh25 ($0.23) per share after the shareholders approved the transaction on June 25. The offer will close on September 24 or earlier if the company acquires 20,739,652 shares ahead of the deadline.
“Through this buyback we believe shareholders will realise value and cash in at a reasonable price,” Wilfred Kiboro, the Group’s chairman said last week.
“Last year was a difficult year and NMG share price went down from about Ksh40 ($0.37) at close of 2019 to Ksh16 at the end of 2020. There was a lot of volatility and the few shareholders who wanted to sell were not getting value for their investments,” added Mr Kiboro.
NMG share has been performing well at the Nairobi bourse since announcement of the buyback programme, gaining 44 percent over the past one month to close trading at Ksh25 ($0.23) June 29.
“The shares we buy back could help us in the future in mergers and acquisitions or share swaps. We will be keeping them as treasury and they will not attract dividends so more value will accrue to the remaining shareholders,” Mr Kiboro added.
According to Kiboro, NMG share price at the NSE has been undervalued and has not reflected the media house’s performance and long-term strategy. East Africa’s largest media company has rolled out a two-pronged approach to sustain growth that includes renewed digital presence with the launch of Nation. Africa and a revamp of its print business.
“We are going to go back to investor briefings to engage shareholders to explain the business model and strategy for the next four to five years so they make informed decisions,” he said.