Kenyan investment firm, TransCentury has sold the 34 percent stake it holds in Rift Valley Railways (RVR) to Egyptian firm, Citadel in a deal analysts estimated to worth Sh5 billion ($57.9 million).
The sale comes when RVR has started showing signs of profitability after several years of slow growth, ending seven years of scarcely profitable investment for TransCentury.
RVR, in 2005, got a 25-year concession to operate the 2,350 kilometre line from the Port of Mombasa in Kenya to Uganda, but growth has been slowed by intermittent change in shareholders.
Despite selling its stake, the company expresses positivity about RVR’s fundamentals and stressed that it would continue working to maximise value for stakeholders.
“We are actively exploring other possible ways to work together with Citadel Capital to support RVR and maximise value for all stakeholders,” said Gachao Kiuna, TransCentury chief executive in a statement.
Citadel now holds 85 percent stake in the railway company, changing from its traditional investment pattern of short-term investments to investing with a long-term view. Its interests in mining, cement, energy, agribusiness and cement, transport sectors are well known, but the Kenya-Uganda railway concession comes as one of its flagship investments.
With enough funds made available by shareholders, which raised its capital base to $1.2 billion from $625 million. Citadel has enough money to increase its presence in subsidiaries.
RVR, also an Egyptian company, armed with a $300 million budget, has announced its growth strategy, including plans to increase its stock by one locomotive and 50 wagons every month in the next 24 months.
“Overhaul of locomotives and non-functional rolling stock, along with operational improvements, will help RVR grow its share of Mombasa Port shipping to 12 per cent in 2015 from 7 per cent today,” said Citadel in a briefing last month.