Kenya to have highest number of initial public offerings in East Africa

Money Markets

The number of African companies listing on the bourse could rise by a quarter this year if the firms that plan an IPO go ahead. 

By KENNEDY SENELWA

In Summary

• According to Baker & McKenzie, an international law firm based in London, the number of African companies listing on the bourse could rise by a quarter this year if the firms that plan an IPO go ahead.
• African companies are most likely to go public on their domestic exchanges, with the Egyptian, Kenyan, Moroccan, and Nigerian, South African and Tunisian markets set to be the most active in 2015. 
• Financials and real estate are likely to be the most active sectors, along with more well-established areas of activity such as energy and power.

Kenya is expected to have the highest number of initial public offerings in East Africa this year.

Kenya’s share of IPOs in sub-Saharan African is projected at about 8 per cent while regional ..................
counterparts Uganda, Tanzania and Rwanda will each account for 1 per cent of the total this year.

The East African securities regulatory authorities have set June 2015 as the deadline for harmonisation of capital markets laws in Kenya, Uganda, Tanzania, Rwanda and Burundi.

According to Baker & McKenzie, an international law firm based in London, the number of African companies listing on the bourse could rise by a quarter this year if the firms that plan an IPO go ahead.

The mergers and acquisitions deal specialist said 30 firms are preparing to list this year, from 24 in 2014. The number of IPOs last year rose by a third to the highest level since the global financial crisis, raising over $2 billion.

African companies are most likely to go public on their domestic exchanges, with the Egyptian, Kenyan, Moroccan, and Nigerian, South African and Tunisian markets set to be the most active in 2015. 

READ: African IPOs expected to rise by a quarter in 2015

“There have been several false starts for capital markets across Africa’s economies. We see a more sustainable trend developing,” said Baker’s global head of Capital Markets Koen Vanhaerents.

He said there are sound policies based on a range of factors, including improved corporate governance, better market regulation and of course reasonable economic growth in many countries.

Financials and real estate are likely to be the most active sectors, along with more well-established areas of activity such as energy and power.

South Africa, Nigeria and Kenya are the countries with the projected highest IPO value, partly driven by the exit strategies of private equity investors who snapped up assets in the wake of the financial crisis.

Mauritius is also a popular destination for structuring deals. Egypt is set to be a prominent issuer as the economy recovers from four years of turmoil, making long-delayed deals viable.

South Africa will have 23 per cent of projected top issuers by IPO value, Nigeria (18 per cent), Egypt (15 per cent), Morocco (13 per cent), Mauritius (12 per cent), Kenya (8 per cent), Tunisia (5 per cent) , Zambia (2 per cent), Uganda, Tanzania, Rwanda and Namibia (1 per cent each).

Listings by African-domiciled companies are currently planned in London and Frankfurt, and more are likely to emerge in the course of the year. Six cross-border IPOs are in the pipeline compared with one completed in 2014.

Data compiled by Thomson One, the data arm of Thomson Reuters, shows Sirrus Corporation, Flame Tree Group, New Kenya Co-operative Ltd, Comcraft Group and Mayfox Mining Company Ltd in Kenya could issue IPOs.

The list also includes National Development Bank of Botswana, Groupe Slama of Tunisia, Orascom Telecom Algeria SpA, Total Maroc SA of Morocco, Metallon Gold of Zimbabwe, Total Senegal SA and Wadi Holdings of Egypt.

Ssafren Plc, Steinhoff-European Business, and Ubuntu –Botho Financial Services of South Africa are on the list. Nigeria has Medview Airline Ltd, Heritage Banking Co Ltd, Notore Chemical Industries Ltd, Stanbic IBTC Asset Management Ltd and UBA Capital Plc.

Egyptian firms on list of Thomson One include Raya Contract Centre Co, Emmar Misr for Development, Misr Italia for Touristic Dvip, Suez Canal Axis Dvip Project, Edita Food Industries SAE, Arabian Food Industries Co, Mabany for Real Estate Invest Delta Cement Co and Integrated Diagnostic Hldg Co.

Baker’s Head of Capital Markets Europe, Middle East and Africa, Edward Bibko said development of sub Saharan capital markets has been picking up momentum and the continent has potential for growth.

“Consumer economies such as Kenya are seeing increased appetite for securities among domestic institutional and retail investors. Governments of oil-dependent economies will look at international debt issuance and project finance options to meet budgetary promises,” he said.

Tanzania is expected to issue its debut Eurobond in 2015 while Nigeria is introducing an Islamic bond market.  By September 2014 sub Saharan sovereign debt issuance had already exceeded every prior full year.

International debt issuance by African entities fell 9 per cent in value and 10 per cent in volume, raising $22.6 billion in 63 transactions. The year 2014 was dominated by sovereign issuers and corporate bonds are expected to spike in 2015.

“Despite improving local liquidity, almost all debt from African issuers and a significant amount of equity is bought by international investors, meaning domestic transactions should be documented to international standards,” said Don Guiney, Senior Counsel for Baker & McKenzie, based in London. 

African markets are exposed to global economic sentiment of volatility, with some forecasters predicting a difficult year for emerging markets in 2015 due to falling oil price and strong US dollar among other factors.

“The key is building resilience... Resilience will be a challenge as African markets becomes interconnected,” said Baker’s Managing Partner in Johannesburg Wildu du Plessis.

International and domestic investors alike need standards of corporate governance, market infrastructure and securities regulation to continue to improve.

“London and Johannesburg have been markets of choice for cross-border and domestic deals, respectively, by African issuers over the past decade,” said Baker’s Capital Markets Partner in Johannesburg Chris Hogan.

The EastAfrican