Longhorn (LKL) Begins Spending Its Sh500m Rights Issue Cash

Nairobi Securities Exchange (NSE):
Longhorn Kenya Ltd (NSE:LKL) is in the process of acquiring 74% stake in fellow publisher Law Africa Publishing. But the financial details of the transaction were not revealed. However, the acquisition of Law Africa Publishing is expected to expand Longhorn’s market share in the East African region.
Law Africa Publishing has operations in the three East African countries Kenya, Uganda and Tanzania. In Uganda, it operates through a subsidiary called Law Africa Publishing Uganda and in Tanzania it operators through a subsidiary called Law Africa Publishing Tanzania. Its other subsidiary is called Nathan Limited.
 

Hurdles to closing the deal
While the management of both Longhorn Kenya Ltd (NSE:LKL) and Law Africa Publishing have already agreed to bring the two entities under one roof, regulators and shareholders of the latter will have to weigh in on the proposed merger before the deal can close. 

According to Longhorn’s MD, Simon Ngige, they will need the clearance of the Competition Authority of Kenya and Capital Markets Authority of Kenya before they can add Law Africa Publishing to their asset portfolio. Sometimes regulars require merging partners to divest themselves of certain assets if their operations significantly overlap to an extent that they can potentially tilt the scale of competition in an unfavorable manner for other players in the industry. It is not clear at this juncture how much the operations of Longhorn and Law Africa Publishing overlap as the latter is more focused on publishing of legal-oriented materials.

Sh500 million rights issue cash

The proposal to acquire Law Africa Publishing comes just after Longhorn Kenya Ltd (NSE:LKL) recently raised over Sh530 million through a rights issue arrangement. The management said at the time that the proceeds from the rights issue would enable them to expand into more markets and diversify the company’s revenue streams. The rights issue provided Centum Investment Company Ltd (NSE:ICDC) with the opportunity to significantly increase its stake in Longhorn. Centum now owns 60% of Longhorn.
Centum is also a major shareholder in the privately-held Sidian Bank (formerly K-Rep Bank).

Shares of Longhorn Kenya Ltd (NSE:LKL) shed 2.8% on Monday to close the day at Sh5.20 after rally in the range of Sh5.05 and Sh5.25 during the session.
Nairobi Securities Exchange (NSE):