Kenyan investors will have access to the ongoing Dangote Petroleum shares sale for as little as Sh490 through the Nairobi Securities Exchange under a new vehicle that awaits regulatory approval. This move is expected to open up investment opportunities in Africa's largest Initial Public Offering. The shares will be available for purchase via global depository receipts, which enable investors to hold shares in foreign companies without directly trading on offshore markets.
Investment bank Renaissance Capital will issue Kenyan investors with the GDRs, representing the underlying Dangote shares listed on the Nigerian Stock Exchange. Stanbic Bank will serve as the custodian in the deal, purchasing the Dangote shares and packaging them as GDRs for local investors. This arrangement allows Kenyan investors to buy and sell the receipts on the NSE, providing a more accessible and cost-effective way to invest in the Dangote IPO.
The GDRs will mirror the price movement of Dangote shares traded on the Nigerian Stock Exchange, and investors will receive dividends accruing from purchased shares. However, investors in GDRs may face higher administrative fees and potential liquidity risks. The sponsoring broker and custodian bank will distribute dividends to GDR holders, similar to unit trust schemes.
Proponents of the GDR expect to receive regulatory approval in early October, with the goal of opening the share offer between October 5 and October 13. The receipts or shares are set to list and trade on the NSE from December 8. Renaissance Capital says the Kenya offer will match the IPO structure in Nigeria, allowing investors to buy a minimum of 10 shares in the refinery for just under Sh500.
According to Stanley Kariuki, CEO of Renaissance Capital Kenya, the GDRs have been chosen as the most efficient vehicle to deliver the Dangote shares to the public. The use of GDRs provides transparency on costs, pricing, and trading, and allows all investors to participate in the offer, irrespective of their investment class.
Businessman Aliko Dangote plans to deploy proceeds from the IPO to fund the expansion of his Lagos refinery. He expects to subsequently cross-list the company's shares on the Nairobi bourse, further considering a local listing of the Lamu East African refinery. Dangote's IPO is seen as an opportunity for ordinary investors to participate in the success of the plant, with Kenyans showing interest partly due to the billionaire businessman's plans for a new refinery project in Lamu.
Dangote is selling 4.1 billion shares, representing a 3 percent stake in the Lagos-based Dangote Petroleum Refinery and Petrochemicals Freezone Enterprise, at a cost of Sh49.25 per share. The Sh202 billion proceeds from the IPO will be applied to scaling the firm's processing facility, doubling its capacity from 700,000 barrels per day to 1.4 million barrels per day.
Key points
- Kenyan investors can buy Dangote Petroleum shares for as little as Sh490 through the Nairobi Securities Exchange.
- The shares will be available for purchase via global depository receipts.
- The GDRs are expected to list and trade on the NSE from December 8.
