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Kenya: Safaricom IPO Nets a Whopping Sh191 Billion
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The East African Standard (Nairobi)
8 May 2008
Posted to the web 7 May 2008
James Anyanzwa
Nairobi
The much-hyped Safaricom's initial public offer has raked in Sh191 billion in bids from local and international investors.
The amount realised is way above the targeted Sh50 billion that the Government hoped to raise from 10 billion shares it offloaded in the market.
Preliminary figures show that the local investors have oversubscribed their share offer by close to 254 per cent.
This translates into Sh141 billion refund - an amount that can finance entire budgets of Roads, Water, Housing, Energy and Transport ministries' for and still remain with a reasonable change of Sh6.5 billion.
According to preliminary data released by the Government on Wednesday, foreign investors paid a 10 per cent premium price for the issue to attract Sh76 billion ($1.15 billion). Locally, the issue mopped up a staggering Sh115 billion from the money market. The combined bids reflect a subscription rate of 382 per cent, or a 282 per cent over-subscription.
The report indicated that the foreign investors would pay Sh5.50 per share after a successful book building process that attracted fund managers from South Africa and London, among other key pool of international investors.
The local tranche of the transaction, where processing is still ongoing, attracted more than 750,000 applicants to rope in Sh115 billion, a level that would now require the Government to claw back 525 million shares (15 per cent) from the international pool as promised in the issue's prospectus.
It is, however, not clear whether this rule will apply given the overwhelming response from the international investors. Local and foreign investors have been allocated 65 per cent and 35 per cent of the 10 billion shares on offer. But the Government has a provision to take back up to 15 per cent of the 3.5 billion shares offered to international investors, that is technically reserved to locals if they oversubscribed their offer by more than 200 per cent.
Final results in the local pool will be known over the next few weeks once application processing is finalised. But indications are strong that the investors will not get full subscription even if the plough-back from the international pool is effected.
"The IPO has far exceeded the goals laid out at the launch of this process namely - deepening Kenya's capital markets, maximising revenues for the Treasury and increasing international investor interest in the Nairobi Stock Exchange," says the draft report, Privatisation Commission at Treasury.
Britain's Vodafone owns 40 per cent of Safaricom, while the Government remains with 35 per cent after the IPO offer.
Official allocations will be announced on May 30, while the Central Depository System Corporation (CDSC) will credit applicants electronically to their accounts by June 4.
The much-anticipated trading of the shares at the NSE is expected to commence on June 9.
The IPO successfully introduced the book building approach for the first time in the history of the country's capital markets, whereby the pricing for the international pool was established through the system to fetch a premium price of Sh5.50.
Upon completion, the Safaricom IPO is expected to be the largest Sub-Saharan IPO ever completed. It surpasses those of Africa's economic powerhouse - South Africa's Sanlam and Telkom-SA.
On a pan-African basis, it will be the third largest IPO after those of Maroc-Telecom and Telecom- Egypt.
According to the report, international institutional investors from every continent participated in the book building.
The Privatisation Commission reckons that the level of demand at the clearing price would ensure that the Government realised its goals of maximising revenues while ensuring adequate support of the issue in the secondary market.
A high-powered delegation comprising Treasury officials and the Privatisation Commission accompanied Safaricom's management on international road shows, meeting prospective investors in London and Johannesburg to promote the issue.
Part of their mission was to review Safaricom's books and all the accounts, submitting bids to ensure appropriate investor profile and to determine the final allocations.
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