The Capital Markets Authority (CMA) has approved the sale of Dangote Petroleum Refinery shares via the Nairobi Securities Exchange (NSE) using global depository receipts (GDRs). This approval allows local stockbrokers to market Dangote's initial public offering (IPO) locally. The local sale of Dangote shares was expected to start on Monday morning but was delayed due to undisclosed pending issues. The nod now allows local investors to buy shares for as little as Sh49 a piece.
The Dangote IPO, Africa's biggest ever, was approved and issued in Lagos and could not be marketed and sold in Kenya without CMA approval. The CMA has approved a short-form prospectus for a GDR submitted by Renaissance Capital, enabling eligible Kenyan investors to participate in the IPO. Renaissance Capital will put in place custodial arrangements for funds received from investors. At the close of the IPO and confirmation of share allocation, Renaissance Capital will structure GDRs to be listed on the NSE.
The listing of GDRs remains subject to obtaining relevant approvals from Nigeria's Securities and Exchange Commission (SEC). Renaissance Capital was expecting to get CMA approval last Friday to sell shares between October 5 and October 13, matching the close of the IPO in Nigeria. GDRs are bank certificates representing ownership of a specific number of shares in a foreign company, allowing investors to trade on stock exchanges outside the issuer's home market.
Under GDRs, Kenyan investors can buy shares at Sh49 a piece and trade certificates at the Nairobi bourse. Besides the GDR route, firms like CPF Capital and Advisory, SBG Securities/Stanbic Bank, and National Bank of Kenya are facilitating access to the Dangote IPO through partner relationships in Nigeria. Stanbic Bank is expected to serve as the custodian in the GDRs deal, directly purchasing Dangote shares and packaging them into receipts for local investors.
The GDRs, whose offer price is expected to closely mimic the Sh49 per share offer in Nigeria, will allow more investors to access the Dangote IPO. Licensed firms have been offering Dangote shares at a costlier rate, with some brokers placing the minimum subscription as high as Sh259,520. The IPO, which seeks to raise Sh207.5 billion, runs up to October 13 and offers 4.1 billion ordinary shares, equivalent to a 3.4 percent shareholding of Dangote Petroleum Refinery.
GDRs work like derivatives by mirroring the change in price of the underlying asset, which is the Dangote shares listed in Nigeria. Dangote will deposit shares with a Nigerian custodian bank, which will confirm receipt and deposit units purchased with its Kenyan peer. Stanbic Bank Kenya will subsequently issue GDRs alongside Renaissance Capital, matching units to the number of shares in its vault.
CMA's nod allows the distribution of GDRs to investors up to October 13, when the IPO closes in Nigeria. Investors will be allotted units on November 11, while the transfer of proceeds and crediting of units in investors' CDSC accounts will happen between November 12 and December 2. The GDRs will be admitted on the Nairobi bourse on December 8. This transaction marks the first since the issuance of the policy guidance note on GDRs and global depository notes in Kenya.
Key points
- The CMA has approved the sale of Dangote Petroleum Refinery shares via the Nairobi Securities Exchange using global depository receipts.
- Local investors can buy Dangote shares for as little as Sh49 a piece.
- The Dangote IPO, Africa's biggest ever, seeks to raise Sh207.5 billion.
