Africa rising stars: The deals that make a market

Dangote Group IPOs

Dangote Cement IPO (ECM) Date: October 2010 Size: $14 billion Lead arranger: Afrinvest Nigeria

Our rising stars consider Dangote Groups ventures in Nigeria as the building blocks for Nigeria’s – and the region’s – capital markets. First came Dangote Sugar’s IPO in 2006 where the company raised N54 million on the Nigerian Stock Exchange, the largest issue out of Nigeria at the time.

“The IPO of Dangote Sugar in 2006 was a landmark deal that ushered in a wave of IPOs, increased capital-market awareness and interest, and created more regulatory oversight,” says Danladi Verheijen, CEO of private equity firm Verod Capital.

In 2006, Transcorp raised N60 billion. In 2007, Nigerian bag company Bagco raised N7.27 billion and in 2008 Custodian and Allied Insurance raised N3.9 billion.

Dangote Cement’s listing in 2010 was the next game changer. Its flotation on the stock exchange in Nigeria gave the company a market capitalization of $14 billion to make this deal the largest IPO north of South Africa at the time. 

“The listing added a huge weight to the index and provided liquidity for foreign investors,” says Martin Ganda, CEO of Tamuka Group. “Other privately owned companies – which often shun going public – can follow this example.”

Dangote’s most recent endeavour – a $9 billion oil refinery and petrochemical complex it plans to build in southwest Nigeria – has the potential to transform the capital markets in Nigeria even further.

“[The transaction] reinforces the market capacity for large ticket deals,” says Ishmael Nwokocha, general manager, corporate treasury at MTN Nigeria Communications. 

"The potential listing of the refinery, in line with the billionaire’s strategy of listing, is likely to deepen the capital market and create options for portfolio managers that track the frontier-market index.”

He adds: “This is even more compelling now that sub-Saharan Africa’s contribution to the frontier-market index is likely to increase.”

Apparently, Dangote is still mulling over plans to invest in oil and gas fields in Nigeria to feed the project.

Seplat IPO

Oil and gas company Seplat made history earlier this year when it because the first Nigerian company to list on both the London and Nigerian stock exchanges. 

In April, Seplat raised $500 million on the exchanges – the largest IPO out of sub-Saharan Africa since Dangote Cement in 2010.

“The dual listing of Seplat is a landmark deal which will certainly aid the development of local markets as it highlights the success story of a company founded by Africans, doing business in Africa, in a sector that has historically been dominated by international oil companies (IOCs),” says Yinka Odeleye, director, head of corporate finance for Citibank Nigeria.

“Seplat voluntarily subscribed to the more stringent corporate governance requirements of a London listing and by doing so proved that African companies have the capacity to not only attract capital from global sources into the continent but also run their companies in the most transparent and professional manner."

He adds: “The experience of a dual listing involving London also provided the Nigerian regulators, issuing houses and brokers with a sneak preview of how a developed market exchange manages such offering and the learning benefits of such experience would definitely benefit Nigeria’s fledging capital markets.”

Gabon and Ghana sovereign Eurobonds

The recent flurry of sovereign Eurobonds out of Africa has also garnered the attention of Euromoney’s rising stars.

African countries are raising foreign debt cheaply as foreign investors go on the hunt for yield unavailable in developed markets. And this is also hoped to offset an over-reliance on multilateral and bilateral funding from the west as austerity measures continue to take hold.

The Seychelles was the first country in sub-Saharan Africa, besides South Africa, to issue a Eurobond in 2006. A year later Ghana followed, raising $750 million in Eurobonds. Since then they have been joined by Gabon, Senegal, Côte d’Ivoire, the Democratic Republic of Congo, Nigeria, Namibia and Zambia.

The largest out of the region was Gabon’s most recent issue in December 2013 for $1.5 billion. 

“It was the first sub-Saharan sovereign to issue a bond with a soft bullet maturity, with the bond repaying the principle over a three-year period rather than on one date as per usual, thus reducing any refinancing concerns investors may have,” says Jo-Ann Pohl, CFO of Standard Chartered in South Africa. 

“And the exchange offer on the existing 2017s in conjunction with the new 2024s was an excellent example of pro-active debt management.” Ghana’s second foray into the debt capital markets in 2013 is also worthy of note.

“The transaction was dual listed on the Ghana and London stock exchanges, allowing local investors to trade the bond locally – the first of its kind in sub-Saharan Africa,” says Patience Akyianu, managing director of Barclays in Ghana.

However, plans for another issue of up to $1 billion have been put on hold, as market conditions haven’t been conducive to another issue.