Sunbird Tourism Limited, the Malawi Stock Exchange (MSE)-listed hotel chain, has advised government to reduce its 71 percent stake to around 25 percent as part of its recapitalisation drive.
This means that government, as a majority shareholder, has to offload 46 percent to an investor who could inject the much-needed capital for Sunbird’s expansion projects.
Currently, government has 71 percent shareholding in Sunbird, which listed on the MSE in August 2002, followed by a United Kingdom (UK)-based investor Noel Hayes with 16.44 percent and the remaining 12.56 percent is held by the public.
Over the years, analysts have called on government to dilute its shareholding or recapitalise to boost the hotel chain which boasts of seven hotels and lodges.
Speaking on the sidelines of its annual general meeting (AGM) in Blantyre on Thursday, Sunbird chairperson Phillip Madinga said they want government to hold between 20 percent and 25 percent shareholding or provide the company with K1.5 billion for hotel projects.
He said: “Ideally, we have two options, where government may still be a controlling shareholder which they would dilute to 51 percent. That would give us some money to do some of the projects from next year going forward.
“The ideal dilution that we would want is where we dilute to somewhere 20 percent to 25 percent where government moves down to that level.
“Although the business is profitable, the returns that we are giving, because we are not maintaining our infrastructure, are not as great as they [government] would get even if they were at 25 percent shareholding.”
Madinga said that by diluting the shareholding, the company can embark on a number of other bigger projects such as tourism marketing as tourism is one of the major pillars of the Malawi Growth and Development Strategy (MGDS).
He said Sunbird continues to have limited funding options for its projects and investments as the current options are expensive due to high interest rates, opting for issuance of K1.5 billion ($21 million) bond instead.
“Unless and until the major shareholder, government, makes a decision on recapitalisation and or we are able to identify cheaper sources of funding, Sunbird will only be able to undertake smaller projects and only projects with quick payback periods at the expense of major rehabilitation of its various infrastructure, plant and equipment which has been long outstanding.”
In a separate interview, Ministry of Finance, Economic Planning and Development spokesperson Nations Msowoya said discussions on recapitalisation or dilution, are still underway; hence, could not comment further.
But in an earlier interview said government is ready to recapitalise Sunbird as a major shareholder but can only do so once they are told the pressing needs of the hotel chain.
Between 2016 and 2017, Sunbird lined up three major projects at Sunbird Mount Soche in Blantyre, Sunbird Lilongwe and Sunbird Livingstonia Beach in Salima.