Archive for the 'Depositary Receipts' Category

Innovative African IPO and listing successes show strong demand

Here is a round-up of recent initial public offers (IPOs) and other listings of shares on African Stock Exchanges, many of them over-subscribed. Namibia has scored its first listing of a special purpose acquisition company (SPAC), while Mauritius is the home for an innovative listing of Afreximbank GDRs and of 2 primary listings on the Johannesburg Stock Exchange.

Namibia: Nimbus Infrastructure Limited is first SPAC vehicle
Nimbus Infrastructure Limited listed on the Namibian Stock Exchange (NSX) via private placement and started trading on 6 October. It raised more than N$100 million ($7m) from local investment institutions and retail investors. It aims to invest into information, computer and telecommunications (ICT) projects and institutions in sub-Saharan Africa.

It is Namibia’s first listed capital pool company (CPC). This is a type of company, also known as a special purpose acquisition company (SPAC), is most popular in the USA or Canada and South Africa’s Johannesburg Stock Exchange (JSE) has listed several SPACs.

The company has no commercial operations or assets, except cash. It uses its cash to evaluate promising investments and once it has invested in a viable business, usually within a set timeframe, it continues to operate as a conventional listed company. The funds are kept in an escrow account and are released on approval by shareholders or in line with a pre-approved spending budget, according to the company website. It must also comply with the Corporate Governance Code for Namibia (NamCode).

The private placement was open from 15-29 September. The listing of Nimbus was a joint initiative between Cirrus Capital, Paratus Namibia and Cronje and Company.

According to the company, it “is currently looking at a number of potential transactions and as per the stock exchange rules, aims to take these transactions forward for shareholder approval before the end of the year.” Nimbuas has signed a management agreement with Paratus.

According to an NSX statement, reported in Namibian Economist: “The Nimbus listing boasts exciting opportunities for Namibia, as not only does it focus on the fast-growing ICT sector across the continent, but in so doing, it offers a strong diversification opportunity for the funds of institutions and individuals alike, allowing diversified jurisdiction, currency and sector returns for investors. Further to this, as Namibia’s first CPC, Nimbus represents an opportunity to prove a new concept that will likely form a critical part of the future development of the Namibian real and financial sectors”.

Côte d’Ivoire: Ecobank Cote d’Ivoire
Ecobank Cote d’Ivoire launched a share offer on 27 September and closed it the same day as it was already twice oversubscribed. The IPO was to sell 20.44% of the bank’s shareholding in the form of 2,250,000 shares at XOF20,000 per share, raising XOF45bn (USD79.5m).

The bank is set to list on the Bourse Régionale des Valeurs Mobilières (BRVM) in December, where it will join parent company Ecobank Transnational Incorporated (ETI), a leading share on the BRVM, the Nigerian Stock Exchang and the Ghana Stock Exchanghe.

The offer, organized by stockbrokers EDC Investment Corporation and Hudson & Cie had been scheduled to run from 22 September to 11 October. It was 2.2x oversubscribed on the first day.

According to Enko Capital “Ecobank Cote d’Ivoire was created in 1989 following the acquisition of Chase Manhattan Bank. The bank has since expanded to become the third largest lender in Ivory Coast with a market share of 10.5% in terms of loans and 11.7% in terms of deposits and employs 648 people across 53 branches holding 274,018 accounts.

“Prior to the IPO, ETI held a 94.26% stake in Ecobank Cote d’Ivoire and this will reduce to 75% post listing. ETI was founded in Togo in 1985 and currently has a presence in 36 African countries. The banking group is listed on three exchanges in Africa.. Its stock is owned by more than 600,000 shareholders and the group employs over 17,000 people across 1,200 branches and offices. Ecobank Cote d’Ivoire is the third largest contributor to ETI’s group revenue after Ecobank Nigeria and Ecobank Ghana.”

Namibia: Letshego Holdings
Letshego Holdings Namibia had to extend its IPO by 4 days to 26 September and drop its offer price from NAD4.70 to NAD3.80 per share, according to Enko Capital: “The main purpose of the IPO was to satisfy the Bank of Namibia’s conditions for granting a banking license to Letshego Bank Namibia in 2016 which require a minimum 45% local ownership within a four year period.”

Letshego listed on 28 September on the Namibian Stock Exchange (NSX)with a market capitlaization of NAD1.9 billion, according to a report in New Era and a press release.

Finance Minister Calle Schlettwein did not have a warm view of capital markets as he celebrated the listing: “’With this listing Letshego has taken a dive into the shark pool, but this is a well-prepared dive that you were truly prepared for”.

Over 3,600 qualifying applications were received during the 4-week offer, with individuals and non-institutional investors making up NAD40m of the total NAD180m raised.

NSX CEO Tiaan Bazuin said: “I am extremely pleased with the successful listing of Letshego. There has been a lot of talk about localization in the Namibian market and this listing shows the best way, in my mind, to achieve this goal.”

Letshego Namibia is an offshoot of Letshego Holdings Limited, listed on the Botswana Stock Exchange, which has reduced its holding from 85% to 79%. Letshego Bank Namibia has had a full licence since July 2016, and is a 100% subsidiary of Letshego Holdings Namibia. Its origin in 2002 was as Edu Loan Namibia, making salary loans, and in 2008 Letshego bought majority shareholding.

Mauritius – Afeximbank global depositary receipts
African Export-Import Bank (Afreximbank), headquartered in Egypt, raised more than its $100m minimum target after selling global depositary receipts (GDRs) backed by its Class D shares. The GDRs listed on the Stock Exchange of Mauritius was on 4 October. The minimum investment for the offer was $30,000 and it closed on 22 September.

Afreximbank is a supranational trade finance bank established in October 1993. Class A shareholders consist of African States, African central banks and African public institutions; Class B shareholders are African financial institutions and African private investors; Class C shareholders are non-African investors, such as international banks and export credit agencies; while Class D shareholders can be any investors.

South Africa: African Rainbow Capital Investments
This newly formed company listed on the main board of the Johannesburg Stock Exchange on 7 September, the 12th listing to date in 2017. It raised ZAR4.0bn ($282m) and brought the total capital raised on the JSE in the year to date to ZAR76bn ($54bn), according to this JSE press release.

ARC Investments is a capital raising and investment entity incorporated in Mauritius which will offer shareholders the opportunity to invest in a permanently broad-based black controlled investment entity holding a diversified portfolio of investments. The initial investment portfolio held by ARC Investments will be seeded by African Rainbow Capital Proprietary Limited (ARC), which will remain the majority shareholder in ARC Investments.

Shareholders invest alongside ARC in the initial portfolio of 16 investments in financial services including: Alexander Forbes Limited, Alexander Forbes Group Limited, Indwe Broker Holdings, Senayo Securities and Santam and and 17 non-financial services including investments in agriculture and food production, building and construction, energy, information technology and telecommunications, investment holding companies and real estate businesses. Its most significant investment is a 20% interest in Multisource Telecoms Proprietary Limited, currently trading as Rain. According to Reuters, ARC Investments is valued at ZAR8.5bn, and has 3 cornerstone investors including Singapore’s GIC Pte Ltd, the Public Investment Corporation and Sanlam Private Wealth.

ARC is a majority black-owned investment holding company which seeks to utilize its empowerment credentials, strong balance sheet and the track record of its leadership and brand to invest in financial services distribution businesses. ARC is wholly owned by Ubuntu-Botho Investments (UBI), which was created in 2003.

Patrice Motsepe, Chairman of both Ubuntu Botho Investments and ARC, said: “the listing of ARC Investments on the JSE is a major step towards realising one of the key objectives of ARC, namely to build a world class broad- based black – controlled investment entity for all South Africans.”

Nemer says the JSE is equally proud to help ARC Investments facilitate its goal of providing investment exposure for the public to B-BBEE assets, which are often only held privately.

South Africa – Steinhoff Africa Retail (STAR)

Holding company Steinhoff Africa Retail (STAR) successfully raised ZAR15.38bn (USD1.08bn) after placing 750,000,000 shares at ZAR20.50 each between 4 and 14 September. It listed on the JSE on 20 September.

It brings public shareholding to 21.7% of STAR, which was formed as part of the restructuring of the Steinhoff Group, and Steinhoff International holds 78.3%. The group has 4,808 stores in Angola, Botswana, Lesotho, Mozambique, Malawi, Namibia, Nigeria, South Africa, Swaziland, Uganda, Zambia and Zimbabwe. Brands operating under the STAR group include Pep, Ackermans, Poco, Russells, Flash, Bradlows, Rochester, Buco, Timbercity, The Tile House, Incredible Connection, HiFi Corp, Dunns, John Craig, Refinery, Shoe City, Tekkie Town and Sleepmasters.

According to Enko capital, the offer was 4.8x over-subscribed.

South Africa: Brainworks
Mauritius-registered investment holding company Brainworks, with an investment base focused on hospitality, real estate, financial serice and logistics in Zimbabwe, listed on the JSE on 13 October, after an IPO from 28 September to 11 October. It is the first Zimbabwean company with a proimary listing on the JSE and the 16th listing for the year to date, according to a JSE press release, where it sought to raise ZAR316.5m (USD22.3m) through the sale of 27,523,951 shares at ZAR11.50 per share.

Brainworks was established in 2011 and holds investments including controlling stakes in 2 listed hospitality companies, African Sun and Dawn Properties, which are listed on the Zimbabwe Stock Exchange. It also has investments in GetBucks, GetCash, GetSure, MyBucks, Skyclear and FML Logistics and says approximately 38% of revenue is generated in hard currency.

Donna Nemer, Director: Capital Markets at the JSE, says the exchange is proud to welcome Brainworks to the South African market. “As Africa’s largest stock exchange, the JSE believes we can make an important contribution to the growth and the development of our continent. We do this through offering foreign investors a secure and transparent entry point into Africa and providing the companies who do business here with a liquid platform to raise further capital to fund their expansion.”

Nemer says the JSE also favours dual- or cross-listings, wherein debt or equity is listed simultaneously on the JSE and on a local market. “This assists companies from other African countries to gain access to a much larger capital pool and trade in a more liquid environment, while still allowing local market participation.”

Thanks to research contribution by Enko Capital, which invests in African opportunities.

JSE stock exchange unveils new Africa strategy

This morning (2 April) South Africa’s securities exchange, the JSE Ltd, announced a revised strategy to attract more listings from African countries, as they say international interest in investing into the continent’s growth story continues to soar. The JSE is closing its Africa Board and moving the 2 listed companies onto the Main Board (listing requirements for the Africa Board are the same as for the Main Board) or to Alt-X if they are growth companies. The JSE is also stepping up trading in depository receipts (DRs) and offering a broader range of exchange-traded funds and debt instruments.
Siobhan Cleary, Director of Strategy and Public Policy at the JSE, said in a press release: “The JSE’s existing African offering includes 12 African companies. In future, there will be no differentiation (for listing purposes). For equities, this will mean that we will list the companies on the Main Board or AltX as applicable. We will also actively market and profile the African companies that are already listed.”
She says the move is driven by demand for capital and also by the increasing supply of capital from investors. African consumer markets are increasingly being targeted by local companies and companies from overseas, including a growing wave of foreign direct investment activity. Other very active channels for investments are private equity funds, hedge funds and other investors. “We think it is time that stock exchanges started to play an appropriate role in channelling the investments.”
In October 2011 South Africa’s National Treasury announced that companies previously viewed as foreign listings would in future be treated as domestic and this makes it easier for South Africans to invest in JSE-listed African stocks and makes it easier for foreign companies to raise capital. South African institutions will apparently be able to include JSE listed companies among their domestic asset holdings. Second, the JSE has developed good relations with several stock exchanges on the continent through the African Stock Exchanges Association and the Committee of SADC Stock Exchanges. Third, there are increasing investment flows into the continent’s markets and more funds focused on the region, seen as high growth compared to many world markets.
Nathan Mintah, Chairman of the JSE’s Africa Advisory Committee, commented: “This evolution in JSE’s strategy is a step in the right direction in the quest to increase capital flows into the rest of Africa. Offering issuers and investors the ‘whole JSE’ market platform for access to instruments across the capital structure in equities, mezzanine, and fixed income combined with the JSE’s liquidity will clearly benefit all stakeholders and serve as a catalyst for product innovation in areas such as exchange traded products for the rest of Africa.”
The JSE is diversifying the instrument range it offers investors from the rest of the continent. Cleary says: “We already have four interest-rate instruments from the rest of the continent, as well as an African exchange-traded product. We will give increased focus to listing further debt and quasi-equity products in future. These will also include DRs, which are traded like shares and offer investors the same economic, corporate and voting rights as holding underlying shares directly. DRs enable issuers to reach investors located outside their home markets while reducing the risk of cross-border investment.” The JSE altered its listing requirements last year to accommodate DRs, which will provide a way for African companies to raise capital on the JSE without requiring a secondary listing. DRs are applicable for African companies regardless of whether they have an existing listing on an African exchange or any other exchange. Freely traded in South African Rands, this will allow African companies to market themselves to both South African and international investors.
Cleary says there is a pipeline of companies interested and she expects more African listings this year. The JSE is competing with international exchanges such as London and New York for key listings, and also with Australia and Toronto for mining listings. Recently Nigeria’s Aliko Dangote said (see article in Financial Times, for instance) he would take the $11bn Dangote Cement for a London listing in 2013, and last year Zambia’s Zambeef also opted for London.
The two listings on the JSE Africa Board, launched in February 2009, were Trustco from Namibia and Wilderness Safaris from Botswana. The JSE says both prefer to be ranked with their sector peers and in industry sectors. Quinton van Rooyen, Trustco Group MD, commented: “This repositioning of Trustco allows the company, whilst keeping its African identity, to be benchmarked against its peers, on a world-class platform. This can only be beneficial to Trustco and the extensive African investment community.” The JSE is also pledging roadshows and analyst events to highlight the African companies from outside South Africa.
The JSE believes that its approach provides a workable solution to the sometimes complex issue of investment on the continent. The JSE’s approach also contributes to the development of markets within their own economies. Cleary added: “There is an opportunity for the JSE to work with these exchanges and various development institutions to build capacity on the continent. It also gives the JSE the opportunity to evolve its Africa strategy. This has meant looking critically at what issuers – companies, governments and others – from the rest of the continent are looking for, and aligning their needs with the JSE’s objectives,” says Cleary.

African Stock Exchanges Association conference tackles key issues

The next step for Africa’s securities exchanges is critical for the continent’s development. There is a huge demand for capital to be put to productive use in what could be the world’s fastest-growing continent, with a dire need for fast growth to drive out poverty. There is also a tide of international risk capital, looking to fund that growth and share in the profits. Between the two are the capital markets, challenged to move fast to become liquid, transparent and effective.
Lots of these topics are on the agenda for The 15th Annual African Securities Exchange Association conference (www.aseaconference2011.ma) (in Marrakesh, Morocco), which looks to have an excellent agenda. Casablanca Stock Exchange is the host, the theme is “Africa, alive with opportunities!”
Top speakers include key opinion leaders such as Thomas Friedman, Mark Mobius and maybe Christine Lagarde of the IMF. Expect speeches from Sunil Benimadhu (Stock Exchange of Mauritius and chair of ASEA), Karim Hajji of the Casablanca bourse, leaders of African securities markets and top speakers from several world bourses including BM&F Bovespa, Istanbul, NASDAQ OMX and the London Stock Exchange, with India’s National Stock Exchange and NYSE Euronext to confirm. They will be joined by finance ministers, bankers, analysts, traders, investors and many more.
Topics on day 1 include
• “The financial crisis: Is there a pilot in the plane?” Top analysts, bankers and traders, possibly joined by a European Commissioner from the heart of the crisis
• The economic implications of the “Arab Spring” for the continent, featuring key Ministers who are rebuilding post-crisis countries, a strategist and others
Capital markets and BRICS (see previous story on stock exchange link-ups) – hear from CEOs and Executive Directors of key BRICS stock exchanges and Emergent Asset Management
Nursing Africa’s future IPOs: heads of top African stock exchanges from Mauritius to Morocco, via Ghana and maybe Nigeria, plus PAI Partners, a leading French private equity firm
• A new FTSE-ASEA African index.
Day 2 tackles
Regulation for cross-border development: Regulators from Morocco and the central African stock exchange, plus long-term Africa bull stockbroker Jonathan Auerbach
Cost-effective and scalable technology options for emerging markets exchanges – featuring Tony Weeresinghe of the LSE, Anne Ewing of NASDAQ and maybe Joseph Mecane of NYSE Euronext, 3 top suppliers of securities markets systems to the continent who hold many of the keys to the next stage of evolution.
• “What’s hot in Africa today?” with a host of top speakers from politics, consulting, banking, mining, economics and development finance covering energy, infrastructure, mining, industry, agribusiness and others.
OPINION: Please note the Day 2 morning topics address critical and urgent issues of how African stock exchanges can work across (colonial) borders to build liquid and effective markets, part of the grand process of African integration and building viable economies.
Expect participants from over 100 countries. The ASEA AGM and committee are on 11 Dec and the conference starts on 12 Dec. The official language is English with Arabic and French translations.
Unmissable! Book the conference here via the ASEA website (www.africansea.org).
Warning!! You may not want to come home. The conference is in Hotel Palmeraie Golf Palace & Spa. The conference website says: “As a backdrop, the majestic, silvery, sentry-like summits of the High Atlas stand out. At the foot of the mountain lies a beautiful city, built in red and surrounded by age-old palm trees. Monuments defying time form a string of pearls for her. An enticing labaryinth, created centuries ago, of old ramparts meanders along its slender “body”. In this fairy-tale decor, lies Marrakesh the legendary; Marrakesh the imperial, the pearl of the south, bathed by an invigorating sun all year round.”

Why African investors use Depositary Receipts?

Many foreign investors have investments in Africa but hold them in international custody in London or New York and perhaps wish to trade them on international securities markets such as London Stock Exchange or New York’s NYSE Euronext. They would choose to hold their equities in the form of Depositary Receipts, usually known as “American” (ADRs) if issued in the US, “Global” (GDRs) in London and there are DRs in several other countries including South Africa (SADRs).
The idea is that shares listed on an international exchange are transferred to a strong financial institution, who then issues a DR security which can be more easily traded on an international exchange or over-the-counter (OTC) market. BNY Mellon dominates the field but other issuers include JP Morgan Chase, Citi and Deutsche Bank. The total value of DRs traded in 2010 worldwide was $3.5 trillion, up 30% on 2009, and 89% of this trading was in the US.
Michael Cole-Fontayn, CEO of BNY Mellon Depositary Receipts (www.bnymellon.com), explained to African Capital Markets News that when institutional investors request, either for a capital raising or for more trading, BNY Mellon approaches the company and other stakeholders to set up a DR programme, usually under English or New York law. The details of the new DR security, including its currency, can be adapted to suit the international investors.
BNY Mellon holds the underlying security in the local market through a custodian, usually Standard Bank, while the newly issued DR clears and settles through the usual international clearing houses. An investor who has bought the shares in the local market can also approach BNY Mellon to convert them into DRs, which are often cheaper to own and easier to trade and settle.
When an investor holding a DR wishes to sell, he may first look for an international buyer for the DR. If not, his broker can find a buyer in the home market, then BNY Mellon would cancel the DR and deliver the shares for settlement in the local market. This can be done overnight if there is a time difference, but cancellation was suspended for Egyptian DRs when the Egyptian Exchange closed for two months in January-March 2011.
BNY Mellon currently offers DRs in shares in South African, Nigerian and Egyptian companies and offers indices based on the DRs. South Africa’s Anglogold Ashanti raised $705m through issuing DRs in New York in September 2010. Egypt’s Orascom Construction and Remco Tourism Villages created DR programmes for the US OTC markets, while Orascom Telecom traded $1.8bn of DRs on the LSE’s International Order Book (IOB) market. Four African companies – Malawi’s Press Corp, two Nigerian Banks and media house Naspers of South Africa – have GDRs listed on the LSE’s Main/Professional Securities Market.
Mary Gormley, Vice President at BNY Mellon Depositary Receipts, said that one big advantage was the speed of clearing and settlement and reduced costs. For instance, Oando plc, listed on the Nigerian Stock Exchange then cross-listed on the JSE in 2005. Movements between share registers could take 40 days, while equivalent changes using the DR system would be much quicker. She believes the DR programme will grow, with growth businesses in Kenya and Ghana interested and Senegal, Togo and Zimbabwe also considering it: “DRs come out of a need for capital raising.”