Sign in
Dammam-based pipe and industrial products manufacturer Saudi Arabian Amiantit will kick off a rights issue tomorrow as it looks to increase its total capital by 4x or so, the company said in a disclosure to Tadawul. The subscription period wraps up on Sunday, 10 March.
Background: Amiantit shareholders approved last week a capital increase of SAR 346.5 mn in a bid to pay down debt and boost the company’s liquidity. The move would bring total capital to SAR 445.5 mn by way of a rights issue.
Uh, Enterprise? What’s a rights issue? Think of a right as a form of tradable security, each giving a shareholder the right to buy new shares at a predetermined price before those shares are offered to anyone else.
How it works: Existing shareholders have the option of not exercising their rights (ie: doing nothing); they can exercise their rights (buy some or all of the shares they’re being offered); or trade the rights (sell them to someone else or buy more rights if they want more exposure to Amiantit. Investors who own no shares can buy rights from current shareholders, and folks who do nothing or sell their rights would be diluted down if the rights issuance sees others subscribing.
The allocation of rights shares: Each shareholder will be granted 3.5 rights for every share they hold. Each right can then be used to subscribe to one new share at a reduced cost of SAR 10 a piece. No information was yet provided about the indicative selling price to institutional investors.
Rights trading for Amiantit wraps up on Tuesday, 5 March.
Selling rump shares on the open market: The underwriter on the transaction will be selling any remaining unsubscribed shares to institutional investors in a rump offering. Investors that buy rights issues from existing shareholders that don’t wish to exercise their subscription rights, will be subscribing to the new shares through private placements with the underwriter.
Use of proceeds: SAR 165 mn will be injected into the company’s working capital until 4Q 2024, while SAR 156.5 mn will be used to pay down debt, and SAR 25 mn will be paid in transaction expenses, according to the prospectus (pdf).
Latest results: Amiantit’s net losses declined 65% y-o-y to SAR 3.5 mn in 1H 2023, while its revenues rose 51% y-o-y to SAR 364 mn over the same period.
Market reaction: The company’s shares rose c.10% to SAR 29.30 at yesterday’s close.
ADVISORS- Wasatah Capital is quarterbacking the transaction as financial advisor and underwriter, while Al-Nafaie Investment Group is acting as lead manager, and Gulf Legal Advisors is legal counsel.
