Archive for the 'IPO' Category

Africa issuers raised $341m in 6 months, down 28%

Enterprises based in Africa raised $341 million through equity issues in the first half of 2019, down 28% on the $472m raised in the first half of 2018. Law firm Baker McKenzie has published its Cross-Border IPO Index for H1 2019, using data sourced from Refinitiv, and says this was mainly because only $85m was raised from 4 initial public offers (IPOs) on African exchanges, down 80% from $419m from 4 IPOs in the first half of 2018.

The numbers exclude mega issues by Africa-focused issuers based outside Africa. These include $750m raised on 28 June by the IPO for UK-headquartered Airtel Africa (read about the slow first day) which operates in 14 countries; and $196m raised by pan-Africa e-commerce Jumia Group (headquartered in Germany) on the New York Stock Exchange in April, see our article about the share price performance since then. Jumia sells in 13 African countries and is top e-commerce website with over 15m monthly visitors in Nigeria.

Wildu du Plessis, Head of Capital Markets at Baker McKenzie in Johannesburg, says in a press release: “The drop in African IPO values in H1 2019 was mostly because of political and economic uncertainty on the continent. Investors wanting to raise capital in Africa are thinking twice and waiting for political and economic stability to return before going ahead. Also eroding investor confidence in Africa are the escalating global trade tensions, which have culminated in, for example, the so-called United States (US) China trade wars and the possibility of a “no deal Brexit” – both have the potential to impact African economies significantly.”

Egypt buzzing

Listing bell and trading floor of the Egyptian Exchange

Baker McKenzie says Egypt is generating buzz around its pipeline of IPOs with some speculating this could be the busiest year for listings in Cairo since the uprising in 2011. Growing confidence in economic policies introduced since the currency float has boosted the Egyptian Exchange (EGX) and is prompting companies to consider share sales.

In April Khalid Abel Rahman, Assistant Minister of Finance for Capital Market Affairs, said the Government was embarking on an IPO programme is to raise EGP100bn ($5.8bn). Mohamed Farid, Chairman of the Egyptian Exchange, said that three private companies expect to launch initial public offerings (IPOs) before the end of 2019,

Baker McKenzie says a large IPO is Carbon Holdings Ltd, expected to raise $250m by selling a 30% stake and listing in London and Egypt. The company has missed the Q2 timetable mentioned by Karim Helal, Managing Director of Corporate Finance and Investor Relations, in this article last September. EFG Hermes is acting as advisor and global coordinator for the IPO, Baker & McKenzie is local legal counsel, and White & Case is international counsel.

Another large IPO is expected from Banque du Caire SAE, owned by Egypt’s second-largest state-owned bank Banque Misr. The bank has announced it will offer a 20%-30% of its shares for sale through private placement and public offering. The offer is expected to raise $300m-$400m and is forecast to happen in Q3 or Q4.

Hard work in South Africa

Du Plessis warns that governance concerns held back capital raising in South Africa: “Capital raising has decreased substantially in recent years, also due to economic and political uncertainty. Political stability will hopefully begin to return now that country’s elections are over, but there is still a lot of work to do to stabilise the economy. The World Bank recently downgraded South Africa’s growth rates and I think there is at least another year of hard work before the economy starts to recuperate and capital markets in South Africa recover,” Du Plessis says.

Life returns in Nigeria

Du Plessis adds: “There are also signs of life returning to Nigeria’s capital markets. Political instability was also to blame for a big collapse in capital raising in Nigeria in recent years, but the country looks to be recovering”. Baker McKenzie’s recent Global Transactions Forecast predicts more IPOs in Nigeria in the next 3 years. “Hopefully this is the start of a long upswing in capital raising activity in the country,” says Du Plessis.

Not specifically mentioned was the $5.1bn listing of MTN Nigeria on the Nigerian Stock Exchange (see article), which is expected to be followed by a public offering of shares soon.

By sector (details from Baker McKenzie, Enko Capital and other sources)

Energy and power: South African company Renergen Ltd, which produces natural gas and helium, in an IPO in Australia offered 12.5m shares at AUD0.80 to raise AUD10m ($7m) for its Virginia Gas Project in South Africa. Financial: Banking group Oragroup listed on the Bourse Régionale des Valeurs Mobilières (BRVM) in April after a successful IPO in Oct-Nov 2018, selling 20% of the shares to raise XOF56.92bn ($101.2m) in the largest share offer on the BRVM.
Technology: It was reported by Enko that telco Mascom could do an IPO in Botswana later this year and Econet’s Strive Masiyiwa says it will be in October and will be the biggest listing on the Botswana Stock Exchange, according to this report. Namibia’s MTC (Mobile Telecommunications Corporation) has announced plans for an IPO in Mar-June 2020.
Real estate: ICON Properties PLC’s IPO last December in Malawi raised $19.3m, and the shares were listed on the Malawi Stock Exchange in January.
Industrial: Skyway Aviation Handling Co (SAHCOL) in Nigeria launched an IPO in November 2018 but only raised NGN1.2bn ($3.4m) compared to a target of NGN1.9bn ($5.2m) despite extending the offer until January. It listed on the Nigerian Stock Exchange on 24 April.
Healthcare: Speed Medical SAE raised EGP21.5m ($1.3m), less than half its target in a domestic IPO before listing on the Egyptian Exchange in April. Consumer: Eastern Tobacco, listed on the EGX, announced in March that it had raised EGP1.7bn ($104m) through offering 4.5% of its shares in public and private offers.

Global Outlook

The Africa picture mirrors a global 37% fall in capital raised through IPOs in global markets, compared to the first 6 months of 2018. According to Baker McKenzie, a total of $69.8bn was raised across 514 IPOs, which is the lowest for value and volume since 2016. The US Federal government shutdown, continuing trade tensions between the US and Beijing, the ongoing Brexit saga and the decline of mega IPOs all contributed to a slower market performance. “With fewer IPOs in the market, competition amongst exchanges is growing, as some listing locations make strategic changes to entice public offerings. The introduction of China’s Science and Technology Innovation Board looks set to shake up the market and challenge New York and Hong Kong for tech listings. “

Koen Vanhaerents, Baker McKenzie’s Head of Global Capital Markets, says: “.. significant political issues stifled activity, along with a change in investor sentiment towards risk – particularly among pre-revenue companies.” The decline “is perhaps skewed slightly when compared to the stellar performance seen in the same period in 2018. With a strong pipeline, H2 2019 looks set to deliver a much more prosperous performance overall.”

EMEA outlook

The EMEA IPO market struggled during the first 6 months of 2019 due to uncertainties surrounding the UK’s exit from the European Union. Overall capital raised fell by 67% compared to the same period in 2018 to $9.2bn while the number of IPOs fell by 61% to 47. Cross-border activity was even more profoundly impacted with only three listings in EMEA and only one of those on the London Stock Exchange. Domestic activity levels helped the London Stock Exchange to retain the top spot for overall capital raising at $2.7bn from 12 listings. Seven of these listings were from the financials sector and raised almost $2bn, the largest of which was Network International’s $1.4bn IPO.

Second to London was Borsa Italiana with $2.3bn from 7 listings, boosted by the $2.2bn Nexi SpA listing. SIX Swiss exchange pulled in $1.9bn from 2 IPOs, with Stadler Rail’s debut accounting for $1.3bn of that.

Despite its sluggish performance, EMEA is proving to be the region of choice for FinTech listings, particularly in the payments field, as the age of digitization and cashless transactions continues to explode, fueling the need for innovation and technological growth. FinTech listings accounted for more than a third of capital raised and the largest listing was Nexi SpA’s IPO.

Weak reception for Airtel Africa $750m IPO

Share price chart from ADVFN ( https://uk.advfn.com/stock-market/london/airtel-africa-AAF/share-chart )

Shares in Africa’s second biggest telecom company had a disappointing start in conditional trading on the London Stock Exchange today. The initial public offer had been priced at the bottom of the 80p-100p range, and in exchange trading it quickly plummeted 16% from 80p and by 4pm the shares had retreated to around 67p.

Today the trading was conditional, only for holders allocated shares in the global IPO. The shares are set to start trading unconditionally on the LSE from 3 July and Airtel Africa will be dual-listed on the Nigerian Stock Exchange from 5 July.

The offer of 744.0m shares had raised approximately £595 million ($750m), including 39.2m shares offered to Nigerian institutional and high net worth investors for a total Nigerian offer of some $39.4m.

According to this morning’s stock exchange news service RNS announcement : “The offer was oversubscribed with strong interest from a variety of reputed global investors across the United Kingdom, United States, Africa, Europe, Middle East and Asia. Dominant allocation to Global long only, strategic and pre-IPO investors.”

There is an over-allotment option of 67.6 new shares which, if exercised in full, would account for approximately £54m of the offer. Including the overallotment option, the market capitalization at this afternoon’s price is some £2.6bn ($3.2bn), down from the offer valuation of £3.1bn.

After the IPO the free float was 19% but after including pre-IPO investors holdings the free float will be over 25% and it aims to be included in FTSE UK indices.

According to the RNS announcement, Raghunath Mandava, CEO of Airtel Africa, said: “We are delighted by the strong response we have received.. This is a proud moment for the team that has built Airtel Africa into the second largest mobile operator in Africa. We are now the first telecom company to simultaneously list on the Premium segment of the London Stock Exchange and Nigerian Stock Exchange through an IPO.”

According to our article in January and this month in here and today’s article in the Financial Times a consortium of investors including SoftBank Group, Singapore’s sovereign wealth fund Temasek, Singapore Telecommunications and private equity firm Warburg Pincus invested $1.25bn at a valuation of around $4.4bn last October. In January this year Qatar Investment Authority invested $200m at a valuation closer to $5bn.

At that stage it was anticipated that the London and Nigeria IPOs would raise $1.25bn.

The IPO was advised by 8 global banks: JP Morgan, Citigroup, BofA Merrill Lynch, Absa Group Limited, Barclays Bank PLC, BNP Paribas, Goldman Sachs International and Standard Bank.

Indian parent Bharti Airtel aims to use the funds to slash debt and free cash to combat rival Reliance Jio Infocomm in India.

Airtel Africa is the holding company for Bharti Airtel’s operations in 14 countries, including Kenya, Tanzania, Nigeria and Ghana. It is Africa’s second largest telco with over 94m customers, and ranked in the top 2 carriers in most of the countries where it operates, offering 2G, 3G and 4G services, plus mobile commerce through Airtel Money.

Performance had improved after years of losses against financially stronger telco players in Africa, including Vodacom. Rising mobile data consumption had helped it reach a first full year of profit and the figures for the year to 31 March were revenue of more than $3bn and operating profit of $734m.

Airtel Tanzania HQ (photo by Prof.Chen Hualin creative commons by Wikipedia)

Airtel Africa confirms June $750m listing in London

Airtel Tanzania HQ (photo by Prof.Chen Hualin – Own work, CC BY-SA 3.0, creative commons by Wikipedia

Airtel Africa has confirmed that it is going ahead in June 2019 with its $750 million listing on the main market of the London Stock Exchange, as flagged up in January in our article. Owned by India’s Bharti Airtel, it is Africa’s second biggest mobile operator with operations in 14 countries and has 99m subscribers and 14.2m mobile money customers.

It said this week that it is aiming for a premium listing on the main market of the LSE, meaning it will float at least 25% of hits shares. It could offer up to 15% more shares through an overallotment option, according to a report in Financial Times which reports that the group says the exact number of shares to be sold and the indicative price range of the offer will be determined “in due course”.

Airtel will use the proceeds to cut the ratio of net debt to EBITDA (earnings before interest, tax, depreciation and amortization) to 2.5x, according to City AM. It also plans to expand data and mobile money services across Africa.

It is also considering a listing on the Nigerian Stock Exchange, according to reports.

Advisers and joint bookrunners appointed are JP Morgan, BofA Merrill Lynch, Citigroup, Absa, Barclays, BNP Paribas, Goldman Sachs, HSBC and the Standard Bank of Africa but the sole as its advisers. JP Morgan will be sole sponsor; BofA Merrill Lynch, Citigroup and JPMorgan will also act as joint global co-ordinators.

The amount to be raised in the listing is down from the figure of $1bn given by Reuters on 28 May quoting Airtel, and the $1.25bn figure in January and February.

For the year to 31 March it posted revenue of more than $3bn and operating profit of $734m. For more background on the shareholders and earlier capital raises, read our earlier report.

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MTN Nigeria shares soaring after $5bn listing

Telecommunications firm MTN Nigeria has had strong days of trading since it joined the Nigerian Stock Exchange in a listing by introduction on 16 May. As it moves closer to what the company may feel is “fair value”, chances of a future initial public offering (IPO) increase.

The $5.1bn listing of 20.4 billion (20,354,513,050) ordinary shares of MTN Nigeria Communications Plc (MTNN) at N90 per share on the Premium Board makes it the second biggest stock on the NSE after Dangote Cement plc and ahead of Nestle Nigeria plc, according to Bloomberg. It is the Nigerian unit of MTN Group Ltd, Africa’s biggest mobile-phone company.

Journalist Shola Lawal writing in Mail and Guardian newspaper described the scene: “At exactly 2.30pm, when the stock market closed on Thursday, MTN Nigeria’s chairperson Pascal Dozie and Ferdi Moolman, MTN Nigeria’s CEO, excitedly clanged metal sticks on a gong on the crowded trade floor at the Nigerian Stock Exchange (NSE) building. The room, filled with brokers in their maroon jackets, erupted in celebration.”

The shares were priced at N90 and have since climbed some 10% a day to reach N119.75 by close of business on 20 May. The main shareholders are only letting a few shares go until the share gets a higher price, according to an interesting interview by Kayode Omosebi, Team Lead, Financial Advisory at ARM Securities on CNBC. He estimates the stock will keep moving until it gets past N130 when more stock could become available, but his firm estimates “fair value” at N149.

Omesebi adds that interest has been wide including retail investors, and could spark a revival of interest in other equities. It will also widen liquidity across telecom stocks in Africa as investors will have a wider range of shares in South Africa, Kenya, Ghana and other markets.

The NSE listing is part of a settlement with the Federal Government of Nigeria after a $5.2bn fine was imposed for failing to meet at 2016 deadline to register SIM cards. In September 2018 there was a $2bn bill for back taxes, and the Central Bank of Nigeria said it has illegally repatriated $8.1bn between 2007 and 2015.

The initial plan was for a share offer or IPO, and MTN Chairman Dozie was not giving any timetable for when that will come: “We were to have an IPO but due to unforeseen circumstances we couldn’t. Half bread is better than none.”

Oscar Onyema, Chief Executive Officer of NSE, said in a press release: “Having MTN Nigeria listed in our market is a testament of the exchange’s commitment to building a dynamic and inclusive market and creating channels for sustainable investment. This listing will promote liquidity for MTN Nigeria, enhance its value and increase transparency, as our platform remains one of the best avenues for raising capital and enabling sustainable growth for national development”.

Analysts also hope that the listing will encourage international oil companies and two other key telecoms firms, Airtel and Globacom.

Mail and Guardian quotes Ugo Obi-Chukwu, founder of leading financial literacy website, Nairametrics: “The last time we had any major listings was in the early 2000s and it was the Government that stimulated those listings… This will open the floodgates for more listings and possibly renew an interest in the stock market.”

The premium board is “a listing segment for the elite group of issuers that meet The Exchange’s most stringent corporate governance and listing standards. This Board features Dangote Cement Plc, FBN Holdings Plc, Zenith International Bank Plc, Access Bank Plc, Lafarge Africa Plc, Seplat Petroleum Development Company Plc and United Bank for Africa Plc,” according to the NSE.

IPO report 2 – African companies raised $2.2bn in 2018

Africa-focused companies raised $2.17 billion via 18 share offers (IPO) and listings in 2018, but the number is down 25% from $2.89bn raised in 2017 with 26 share offers and listings. According to asset manager Enko Capital, the slowdown was driven by “unfavourable market conditions”.

The Egyptian Exchange had 4 IPOs in 2018, and Ghana, Morocco and South Africa had 2 IPOs each and Botswana and Uganda one each. Six Africa-focused companies also offer shares through IPO on foreign exchanges in London and Australia. The offers included 2 IPOs linked to exits by private equity firms, continuing a trend to develop this as an exit route for private equity growth investors in African enterprises.

Enko Capital adds that the African exchanges enjoyed another 16 new listings in 2018, of which 7 were listing by introduction (down from 8 in 2017), 6 were cross listings (5 in 2017) and 3 were spin-offs as a company separated a part (4 in 2017).

The total number of listings for Africa-focused firms was 34 in 2018 (43 in 2017).

Botswana’s December bank listing

On 13 December 2018, African Banking Corporation of Botswana Limited (BankABC) successfully listed on the Botswana Stock Exchange following an IPO which raised BWP361.05 million ($33.90m). It is Botswana’s fifth largest bank in Botswana by assets and has over 60,000 customers and 330 employees. The IPO featured 180,525,000 shares or 24.9% of its share capital at BWP2.00 each.

Bank ABC is a subsidiary of Atlas Mara through ABC Holdings Limited, also incorporated in Botswana, which is the parent company of a number of sub-Saharan Africa banks operating under the BancABC brand in Botswana, Mozambique, Tanzania, Zambia and Zimbabwe and a group services office in South Africa. The group was formed through mergers and acquisitions and offers personal, business and corporate banking as well as asset management, stockbroking and treasury services.

Egyptian education provider listed Sept

The Egyptian listings included an IPO of some 14.5m shares of Egypt’s Cairo for Investment and Real Estate Development company (CIRA) which was 18.9 times oversubscribed in September 2018. There was also a private offer for 192.5m shares which was 10.6 times oversubscribed, according to this story from African Markets website. The total offer was 207m shares at EGP6.00 each for a total of EGP1.2bn ($70.7m). CIRA is a private education provider in Egypt, targeting both the K-12 and the higher-education segments in six governorates, the main selling shareholder was the Social Impact Capital Ltd, according to Egypt Today.

IPO report – Airtel Africa looking for $1.25bn in 2019

++ STORY UPDATED AFTER ARTICLE IN SUNDAY TELEGRAPH IN UK ON 3 FEB 2019 ++

Airtel Africa, a UK-based company, is on track for an initial public share offer (IPO) on an international stock exchange in 2019 expected to raise $1.25 billion. Last November 2018 the board announced it had appointed 8 global banks JP Morgan, Citigroup, BofA Merrill Lynch, Absa Group Limited, Barclays Bank PLC, BNP Paribas, Goldman Sachs International and Standard Bank Group for the IPO. It aims to value the African business at some $8bn.

The company has denied a report on Bloomberg that the IPO could be delayed from March 2019 for 6 months due to emerging markets turmoil.
By that date parent Bharti Airtel had raised $1.25 bn in pre-IPO placements to 6 global investors, according to a regulatory filing on the Bombay Stock Exchange (reported in Economic Times of India).

On 3 Feb, an article in the Sunday Telegraph newspaper suggested the IPO would come to the London Stock Exchange later in the year, after delaying the float because of volatility. At $8bn it would be the LSE’s biggest listing since 2017. It adds that Airtel Africa in January secured a further $200m investment from Qatar’s sovereign wealth fund to reduce cash borrowings ahead of the listing.

According to journalist Christopher Williams: “Airtel Africa has turned around in ¬recent years, after making heavy losses in competition with financially stronger players in Africa, including Vodafone-controlled Vodacom. In its most recent quarter profits doubled as mobile data consumption increased across its territories, building on its first full year of profit.”

For various reports, the IPO is expected to raise another $1.25bn. After the IPO Bharti Airtel will only hold some 65%, down from around 92%-93% at present. The pre-IPO investors include Warburg Pincus, Temasek, Singtel and Softbank Group International, according to the report. The money will be used to cut back debt and free up cash to combat rival Reliance Jio Infocomm in India.

Airtel Africa is the holding company for Bharti Airtel’s operations in 14 countries, including Kenya, Tanzania, Nigeria and Ghana. It is Africa’s second largest telco with over 94 million customers, and ranked in the top 2 carriers in most of the countries where it operates, offering 2G, 3G and 4G services, plus mobile commerce through Airtel Money.

In December, the tax authority in Niger had ordered the closure of Airtel Niger which has 4.4m customers, over a tax dispute. French-owned Orange said it had also been threatened with closure in Niger over a tax demand, according to this report.

Airtel also announced a new board from the parent company and the investors: Sunil Bharti Mittal, Raghunath Mandava, Akhil Gupta, Vishal Mahadevia, Alok Sama, Arthur Lang, Shravin Bharti Mittal and Richard Gubbins. In a press release it said the board: “brings extensive experience across industry verticals including – telecom & ICT, financial markets as well as in technology, software development and consultancy”.

African revenues rose nearly 13% for the quarter to September, and net income compared to a loss a year earlier.

Some African IPOs – August 2018

Uganda – CIPLA-Quality Chemicals IPO closes 24 August
CIPLA-Quality Chemicals Ltd opened its initial public offer (IPO) on 13 August and will close on 24 August, aiming to list on the Uganda Securities Exchange on 24 September. The pharmaceutical company aims to raise $45 million through offering a 18% stake via 657,179,319 shares at UGX256.50 per share, according to Reuters. The company manufactures drugs that include anti-retroviral, anti-malarial and Hepatitis B medicines and its products are sold in Cameroon, Comoros, Kenya, Namibia, Tanzania, Uganda and Zambia.
India’s Cipla Limited, Uganda’s Quality Chemicals and the Government of Uganda set up the company as a joint venture in 2005, and TLG Capital and Capitalworks Investment Partners invested in the company in 2009, holding stakes worth 12.50% and 14.40% respectively. Lead transaction advisor was reported to be Renaissance Capital in Kenya and Crested Capital in Uganda is the lead sponsoring broker.
it ends a 6-year listing drought as the previous IPO in Uganda was Umeme in 2012.

CIPLA-Quality Chemicals in Kampala (file photo)

Egypt – Giza Spinning & Weaving probably Q4
The IPO of garment maker Giza Spinning & Weaving is set for the fourth quarter, probably November. According to reports, the aim is to sell a 40% stake to finance investment of EGP250m ($14m) into expanded production of garments and yarn. The company employs around 4,800 and was set up in 1979. It is the biggest garment exporter in Egypt by volume and the sixth largest by dollar value, with 87% of production exported to the USA and Europe in 2017. Beltone Financial will be the global coordinator and book runner and a roadshow will run in October, according to Bloomberg.

Uganda – MTN under pressure to list
MTN Group Ltd, which has 55% of the mobile market in Uganda with about 10.9m subscribers, is seeking to renew its 10-year licence in October. Godfrey Mutabazi, executive director of Uganda’s telecom regulator, says that selling shares on the local bourse isn’t a pre-condition for the granting of a new 10-year contract, but Uganda wants “Ugandans to be part of the company,” according to this Bloomberg report.

MTN Ghana – IPO closed 31 July
The IPO of Scancom PLC, the name of telco MTN in Ghana, closed on 31 July as par of bids for a local licence. It was selling 35% of the company, in line with discussions with the regulator. Details are to be announced soon and trading could begin from 5 September. It is set to be the largest listing on the Ghana Stock Exchange and shares could also be bought using the MoMo Wallet mobile-money platform. MTN has more than 221m customers across 22 markets in Africa and the Middle East. It had agreed with telecom regulators in Ghana and Nigeria to list its local units, and the offer was set to raise GHS3.5bn ($725m).

MTN Nigeria “not yet applied”
MTN had not yet applied for a listing by 9 July, according to a news report which quoted the Securities and Exchange Commission. Previously it had been reported that the listing could go live in August, when Reuters reported on pre-IPO documents in February 2018. It said that MTN planned to list by July and raise at least $400m to cut debt in its Nigeria unit, which was valued at $5.23bn. The Nigerian pledge to list cwas part of a settlemetn whcih also included a $1bn fine in 2016.

Airtel – London or Johannesburg in 2019
Airtel is reported to be aiming to raise up to $1.5bn by listing 25% of the equity in its Africa unit in early 2019, according to this report on Bloomberg, as part of plans to reduce its debt by $4.6bn over three years. Airtel is India’s top wireless operator. It also was reported to be planning to sell part of its stake in a $14.6bn company owning tower infrastructure, formed when Bharti Infratel Ltd merges with Indus Towers Ltd. It is owned by billionaire Sunil Mittal and is hoping to keep its Moody’s credit rating at Baa3. It sold about 8,300 towers in 7 African countries for some $1.7bn in 2015 and in 2016 sold its towers in Tanzania for $179m and sold its Burkina Faso and Sierra Leone units for some $1bn the same year. In 2010 it paid an enterprise valuation of $10.7bn for the African assets of Kuwait Mobile Telecommunications Co, also known as Zain.

Kenya – National Oil Corporation aims at Nairobi and London in 2019
The Government of Kenya plans to raise up to KES103bn ($1bn from a dual listing of shares in state-owned National Oil Corporation in Nairobi and London, according to this news report in Business Daily. NOC needs the money to exercise its rights to buy back shares before production at the Turkana oil field, discovered in 2012.
Petroleum principal secretary Andrew Kamau told the Business Daily that the contract for the concession of oil blocks in the Turkana oil fields to existing operators has a clause allowing the government to exercise a back-in right, which essentially means buying back a percentage of the ownership before production kicks in. “When you sign a contract you have a right to buy back some share, before production. The percentage we can buy back is 15 in one block and 20 in the other. The listing should raise enough money for the purchase,” said Mr Kamau, without indicating whether the State would exercise its rights for the entire stake under the clause. The two blocks are owned by British firm Tullow (50%), Africa Oil (25% and Total (25%). The Government and Tullow was to start small scale crude production of about 2,000 barrels a day in 2018, with full production due from 2021 after building a $2.1bn pipeline to Lamu on the coast, according to Reuters.

London – Intercement delays to 2019
Intercement is to delay its $1.8 billion IPO on the London Stock Exchange from the second half of 2018 to early 2019, according to reports. It makes cement and related products in Brazil, Portugal, Argentina, Mozambique, Cape Verde, Paraguay, South Africa and Egypt and was founded in 2008.

For fuller analysis of recent and upcoming IPOs across Africa, see the website of the Enko Africa Private Equity Fund, a $63.4m fund focused on pre-IPO opportunities across Africa.

Africa-focused Vivo Energy soars after £548m IPO on London SE

Africa’s £1.98 billion ($2.68bn) megalisting Vivo Energy (VVO) soared in its first 2 days of trading on the London Stock Exchange (dual-listed on the Johannesburg Stock Exchange) at the close of last week. After a successful initial public offer (IPO) of shares at 165.00 pence per share for 323.3 million shares, 27.7% of the company, it listed on the LSE on 10 May and traded up 11% on Thursday to 183.20p, before soaring as high as 198.10p on Friday 11 May and then closing at 185.0p.

Vivo raised £548m ($742m) in the share offer, which was the largest UK-listed African IPO since 2005, when Telecom Egypt raised about £650m, and the biggest IPO in London so far this year.

It listed on the Premium Segment of the LSE Main Market. Global coordinators of the deal were Citigroup, Credit Suisse and JP Morgan.

According to the LSE press release, Christian Chammas, CEO of Vivo Energy: “We have been extremely pleased with the investor response to our offer, in what has been a challenging period for the wider markets. Vivo Energy’s differentiated business model, strong track record, exposure to Africa and the growth opportunity it represents has been well understood by investors. We are excited about the momentum in the business and are looking forward to delivering further growth and success as a London listed company.”

In an article in Financial Times Chammas described Vivo as offering international investors exposure to a diverse group of mostly fast-growing African economies with rapidly expanding urban populations: “We are at the heart of the growth story, the growth of Africa’s population and consumer demand.”

Vivo is a retailer and marketer of Shell-branded fuels and lubricants in Africa, operating about 1,800 service stations across 15 African countries, with Morocco its biggest market. It is expanding fast, and is second in Africa after Total. It is owned 55% by oil trader Vitol Group SA of Switzerland, and 44% by private equity group Helios Investment Partners and 1% by management. Last year earnings before interest, depreication and amortization (EBITDA) was $326m. In December it announced a ZAR3.5bn ($256m) share swap transaction with Engen, South African unit of Malaysia’s Petroliam Nasional Bhd, which would add 9 more countries and 300 more service stations, which was awaiting regulatory approval.

According to another article in the Financial Times: “People close to the deal said that investor appetite was strong and the listing was more than two times subscribed. The transaction could unlock other African-focused IPOs that had been waiting until a company successfully tested the market.”

Nigeria’s Dangote Cement, which operates across more than 10 African countries, could be planning to raise between $1.2bn and $2bn by floating 10%-15% of the business, according to chairman Aliko Dangote. In May it announced the appointment of non-executive directors Mick Davis (former Xstrata chief executive) and Cherie Blair (lawyer and wife of former UK prime minister Tony Blair).

Another potential large African listing on the London Stock Exchange in 2018 is Liquid Telecom, which describes itself as: “the leading independent data, voice and IP provider in eastern, central and southern Africa. It supplies fibre optic, satellite and international carrier services to Africa’s largest mobile network operators, ISPs and businesses of all sizes. It also provides payment solutions to financial institutions and retailers, as well as award winning data storage and communication solutions to businesses.”

In March Africa-focused mobile phone tower firm Helios Towers, dropped plans for an IPO because of weak investor appetite. Regional rival Eaton Towers had also been considering a listing.

Vivo Energy (photo credit Vitol)

London Stock Exchange financing African growth

African companies listed or trading on the London Stock Exchange have a total market capitalization of over $200 billion ($271bn), and in the last 10 years have raised more than $16 bn on London’s markets. The 108 African companies is more than any other international market, according to a press release from the LSE.

There are 9 African sovereign bonds listed in London, from: Gabon, Ghana, Namibia, Nigeria and Zambia

According to Tom Attenborough, Head of International Business Development, London Stock Exchange, in an LSE press release: “The success of Vivo Energy’s IPO is a strong statement of international investor interest in building exposure to Africa. As a London-listed company, Vivo Energy, will gain access to the world’s most international market, as well as an unrivalled source of deep liquidity and new investors.

“London is a strong partner to African companies seeking to attract international investment.”

Paternoster Square with London Stock Exchange at right (credit: Wikipedia)

  • Also this month, May 2018, Angola launched a $3bn Eurobond on LSE, the country’s biggest international bond and the first international issuance since 2015.
  • In April the LSE Group, the Nairobi Securities Exchange and non-governmental organization FSD Africa signed a memorandum of understanding to explore the launch of LSEG’s business support and capital-raising programme, ELITE. In May, the first Kenyan company, Olsuswa Energy, joined the programme. So far 850 companies have joined the ELITE programme.
  • In November 2017, the LSE, Casablanca Stock Exchange and the Bourse Régionale des Valeurs Mobilières (BRVM) signed an agreement to roll out ELITE across West African markets, in a signing ceremony presided by Amadou Gon Coulibaly, Prime Minister of Côte d’Ivoire.
  • In June 2017, Nigeria raised $300m through its first Diaspora Bond on LSE, a retail bond aimed at Nigeria’s global expatriate community seeking to invest in their home country’s development. It was the first bond of its kind from sub-Saharan Africa.
  • In March 2017, LSE published its first “Companies to Inspire Africa” report, identifying hundreds of the fastest-growing and most dynamic private businesses across Africa. Vivo Energy is the first company in that report to follow up by listing on LSE.
  • In March 2016, LSEG established an Africa Advisory Group, bringing together 12 distinguished business leaders, policymakers and investors from across Africa, to discuss the challenges and opportunities presented by the development of the continent’s capital markets.
  • In November 2014, London Stock Exchange Group and The Nigerian Stock Exchange signed a capital markets agreement to support African companies seeking dual listings in London and Lagos. The agreement followed the implementation earlier in 2014 of a unique new cross-border settlement process between the UK and Nigeria.
  • In June 2014, LSEG signed a strategic agreement with Casablanca Stock Exchange to share its expertise on the full exchange business chain, from listing to trading, and from clearing to settlement and custody with a commitment to position Casablanca’s capital markets and financial infrastructure as a regional hub.
  • In April 2014, Nigerian oil and gas group Seplat was the first Nigerian company to simultaneously dual list equity shares in London and Nigeria and raised $500m in an IPO.

LSEG market infrastructure technology, supplied by Millennium IT of Sri Lanka, is deployed in more 12 African markets, including Botswana, Casablanca, Namibia and Johannesburg stock exchanges.

Will Brexit impact Africa-focused IPOs?

CONTRIBUTED POST

Brexit, the UK’s decision to leave the European Union, is having a global ripple effect as countries prepare to deal with the effects. Many African countries enjoy a close trading relationship with the UK. The United Nation’s Africa Renewal states Brexit will be a difficult time for Africa as the UK will no longer be able to help shape and lead some of its most important initiatives in the continent. Trade agreements usually take a long time to finalize, and the uncertainty of the UK economy could complicate things further for the African continent. Will Brexit affect initial public offerings (IPOs) in Africa?

While Brexit will have an impact on African businesses, the prospects for the continent look bright due to partnerships with other trading partners. For example South Africa is only one example of a country with excellent existing trade agreements with the EU, which will mitigate the effects, according to BusinessTech. Although the City in London is a key source of finance and financial support, there may be more interest to look at European partners in future when launching IPOs within the continent.

Brexit could also have a positive impact on Africa-focused IPOs with the UK pivoting away from the EU and refocusing their trade in Africa. UK Trade Commissioner for Africa Emma Wade-Smith spoke to African Business magazine of how African and UK trade relations are strong, and that Brexit means “[that] this is an exciting time to explore what this means for us [the UK] in Africa.” She noted that one area the UK was focusing on was oil.

Impact of Brexit on Africa-focused oil IPOs

Vivo Energy Investments B.V., a licensee of Royal Dutch Shell PLC in Africa, announced plans to launch an IPO that would increase the value of the company to over $3 billion, and recently confirmed it would be a premium London listing in May. The large investment shows that despite the economic turmoil predicted because of Brexit, there is still a lot of international interest in Africa. The Vivo Energy IPO represented a boost in Africa’s economic growth, a rebounding of the commodity prices, and a growing middle class, which will increase retail and fuel demand.

Africa’s oil industry has continued to grow. Economists agree that an increase in oil demand would also mean an uptrend for the commodity’s stocks. FXCM asserts that the correlation between oil and stocks isn’t always negative, as there are studies that prove that there’s no solid relationship between the inverse price movements of oil and stocks. When oil prices rise, so too do the stocks of companies that export or produce the fossil fuel. With Africa’s middle class increasing, this will have a positive knock-on affect on oil demand. Brexit could mean that the UK will be looking to increase its oil trade with Africa, which in turn will increase the number of oil IPOs being launched in the continent.

Other IPO issuers in Africa

In a previous article at African Capital Markets News, it was reported that African issuers raised approximately $1.4bn in IPOs in 2017.

This shows that Africa has many options apart from the UK if Brexit should have a negative effect on trading. While trade agreements may take a long time to finalize, and disrupt current deals with the UK, African businesses will still thrive through IPOs that are being launched by international companies within the region.

Brexit will have an impact of the African economy, but African-focused IPOs are coming from other trading partners and should not be affected by the UK’s vote to leave the EU.

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