The Capital Markets Authority (CMA) has finally approved the sale of ongoing Dangote Petroleum Refinery shares via the Nairobi bourse using a special financial instrument.
The approval of the instrument, which is technically known as global depository receipts (GDRs), would allow local stockbrokers to market Dangote’s initial public offering (IPO) locally and list a copy of the shares at the Nairobi Securities Exchange (NSE).
The local sale of the Dangote shares was expected to start Monday morning, but the CMA had delayed the approval due to undisclosed pending issues.
Dangote IPO, which is Africa’s biggest ever, was approved and issued in Lagos, and could not be marketed and sold in Kenya without the CMA nod.
“The CMA has approved a short form prospectus for a global depository receipt (GDR) submitted by Renaissance Capital, enabling eligible Kenyan investors to participate in the initial public offering of Dangote Petroleum Refinery & Petrochemicals (DPRP),” CMA said in a statement.
“In the case under review, Renaissance Capital (Kenya) Limited will put in place appropriate custodial arrangements for funds received from investors. At the close of the DPRP IPO and confirmation of the allocation of DPRP shares, Renaissance Capital (Kenya) Limited will structure GDRs which will be listed on the Nairobi Securities Exchange (NSE).”
CMA, however, noted that the listing of the GDRs remains subject to obtaining relevant approvals from Nigeria’s Securities and Exchange Commission (SEC).
Renaissance Capital, which is behind the Dangote GDRs, was expecting to get the CMA approval last Friday and allow it to sell the shares between October 5 and October 13, matching the close of the IPO in Nigeria.
The GDRs are bank certificate that represents ownership of a specific number of shares in a foreign company, allowing investors to trade on stock exchanges outside the issuer’s home market.
Dangote IPO, which is Africa’s biggest ever, was approved and issued in Lagos, and it cannot be marketed and sold in Kenya.
Under GDRs, which will represent the underlying Dangote shares being listed on the Nigerian Stock Exchange (NGX), Kenyan investors can buy the share at Sh49 a piece and trade the certificates at the Nairobi bourse.
Besides the GDR route, CMA says firms including CPF Capital and Advisory, SBG Securities/Stanbic Bank, Francis Drummond & Co Limited, National Bank of Kenya, Sterling Capital, Kestrel Capital and AXYS Investment Bank 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 the Dangote shares, which will then be packaged into receipts and offered to local investors who can then trade the units at the NSE.
The GDRs, whose offer price is expected to closely mimic the Sh49 per share offer in Nigeria, are expected to allow more investors to access the Dangote IPO in contrast to the alternative.
Licensed firms have been offering the Dangote shares at a costlier rate, with some brokers placing the minimum subscription as high as Sh259, 520 ($2,000).
The IPO, which seeks to raise Sh207.5 billion, runs up to October 13.
The sale is offering 4.1 billion ordinary shares, equivalent to a 3.4 percent shareholding of the Dangote Petroleum Refinery.
GDRs work like derivatives by mirroring the change in price of the underlying asset, which in this case is the Dangote shares listed in Nigeria.
Dangote, as the issuer of the IPO, is expected to deposit shares with the Nigerian custodian bank (Stanbic Bank), with the lender then expected to confirm receipt and deposit the units purchased with its Kenyan peer.
Stanbic Bank Kenya will subsequently issue the GDRs alongside Renaissance Capital, matching the units to the number of shares in its vault.
CMA’s nod allows the distribution of the GDRs to investors up to October 13, when the respective IPO closes in Nigeria.
Investors in the offer will be allotted units/receipts on November 11, while the transfer of proceeds and crediting of the units in investors’ CDSC accounts will happen between November 12 and December 2.
CMA says it has already granted the green light to Renaissance Capital (Kenya) Limited to seek the listing subject to the successful fund raise and subsequent allocation of the requisite shares that will facilitate the listing of the GDRs.
The markets regulator notes the transaction to be the first since the issuance of the policy guidance note on global depository receipts and global depository notes in Kenya.
The sponsoring broker, Renaissance Capital, has touted GDRs as the most effective vehicle for bringing Dangote shares to the public, as a cross-listing of the company remains off the cards until a future date.
