(NAIROBI, KENYA) – Kenyan investors will not take part in Africa’s largest ever initial public offering after the listing of Nigeria’s Dangote oil refinery was restricted to the domestic market.
Local investors had been expected to raise as much as KES 64.8 billion ($500 million / £392 million) of the KES 200.8 billion ($1.55 billion / £1.21 billion) offer, which gives buyers a three percent stake in the refinery.
The IPO was first planned for cross-listing on other exchanges, including Kenya, South Africa, Egypt, Ghana and Rwanda.
The offer has instead been based in Nigeria, although the company is still expected to list on other regional exchanges later.
Without the cross-listing, Kenyan investors can only reach the offer through privately arranged deals.
Sources blame the short window opened for the IPO and regulatory requirements, as the issuer would have needed approval from several authorities before the sale.
“There were too many complexities involved in issuing the IPO across five markets including regulatory hurdles,” a source said.
In Kenya, the offer would have required approval from the Capital Markets Authority.
The Dangote IPO opened on 14th September and is due to close on 13th October, raising as much as KES 200.8 billion ($1.55 billion / £1.21 billion) from the sale of 4.1 billion shares at KES 49.25 ($0.38 / £0.30 / 525 Naira) each.
Investors will receive a three percent stake in Dangote Petroleum Refinery and Petrochemicals Freezone Enterprise in return for their equity.
The issuer has offered a green shoe option, which allows it to sell up to 30% more shares than the initial amount in the IPO.
The offer is widely expected to be taken up by retail investors, based on a minimum subscription of 10 shares and a retail investor incentive scheme.
Kenyan investors have found it hard to join the IPO by other means. Several brokers told this publication that they had not yet cleared structural problems that would allow them to bring the offer to their clients.
Hisa, a mobile and web trading and investment platform, said only Nigerian investors could access the IPO through its app, but added that it was working to give local investors access.
Kestrel Capital said it was also working to overcome structural problems before offering its clients access.
The firm said it had asked its partner broker in Nigeria for advice on the IPO’s allocation criteria, as it widely expects share allotment to favour retail investors.
Brokers fear that the absence of allocation criteria raises risks around possible refunds if the offer is oversubscribed, including foreign exchange losses.
Funds will be converted into US dollars and then into Naira to bid for the shares. The issuer will disclose the allotment criteria at the end of the IPO period.
The Nairobi Securities Exchange said it was working on a solution to bring the IPO to Kenyan investors, and still expects the firm to cross-list on the Nairobi bourse in future.
“We are working on bringing an approved solution for all Kenyans which is also aligned with the issuer,” Frank Mwiti, NSE chief executive officer, told this publication.
A cross-listing of the refinery on the NSE is widely seen as the most likely route to bringing the firm to local investors.
“Cross listing would make it easier to buy and trade the securities as they would be denominated in Kenya shillings and have the approval of CMA,” said Francis Mwangi, Kestrel Capital chief executive officer.
The retail investor incentive, an added sweetener, is expected to see retail investors in Nigeria dominate the offer and push it toward a possible oversubscription.
A retail investor who subscribes for and is allotted offer shares equal to or greater than the minimum subscription will be eligible for a single free incentive share if they hold their shares for 12 months without a break.
The maximum entitlement under the incentive programme will be two per eligible retail investor.
Proceeds from the IPO will fund the expansion of Dangote’s Nigeria refinery, lifting its capacity to about 700,000 barrels per day.
Separately, Africa’s richest man, Aliko Dangote, is seeking at least KES 1.45 trillion ($11.2 billion / £8.8 billion) in debt for his new East African refinery to be based in Lamu, Kenya. The billionaire is expected to break ground on the project on 30th September.
Debt will make up about 70% of the project’s financing, with the remaining 30% expected to be equity.
Analysts believe Dangote could eventually list the Lamu refinery on the NSE, independent of his decision on the cross-listing of the Nigerian plant.
The billionaire has previously stated a goal of publicly listing each company in his vast empire.
“Dangote’s strategy is to grow businesses before pushing them into the capital markets. I would eventually expect the refinery in Lamu to find its way to the NSE,” said Wesley Manambo, a senior research associate at Standard Investment Bank.