Published: October 20, 2011
These are choppy waters in which to float. Debt worries in the US and Europe have caused turmoil in equity markets and as a result IPO activity has been scarce. But, quietly and confidently, African companies are still coming to market.
In August, Dipula Income Fund, a South African property investment firm, listed on the Johannesburg exchange after raising almost ZAR1.4bn (US$179mn) through a private placement. Izak Petersen, Dipula’s CEO, said the deal demonstrated that “a solid investment proposition and underlying portfolio fundamentals are essential for listing success” and the the market’s support of Dipula was “noteworthy, especially considering the volatility of market conditions experienced over recent weeks”.
That same month, the British-American Group, a financial services business, raised Ksh3.5bn (US$447mn) from a listing on the Nairobi Stock Exchange in Kenya. International and institutional investors took up fewer shares than expected, admitted chairman Nicholas Ashford- Hodges. “A 60% subscription is a commendable outcome in the light of what is currently happening in the financial markets,” he said at the time of the IPO’s closing.
“It was unfortunate that the US debt crisis escalated right in the middle of the offer period, causing loss of appetite amongst institutional investors especially those outside Kenya.”
And in September, Botswana’s New African Properties joined its local exchange after an IPO of 10mn linked units was oversubscribed by 82.2%. The fund represents a consolidation of the 65-property portfolio of Cash Bazaar Holdings and its subsidiaries.
And still they queue
Yet more ambitious corporates hope to achieve listings in the coming months.
London-listed African Barrick Gold, Tanzania's biggest gold miner, is reportedly in the final stages of preparing to list shares on the Dar es Salaam Stock Exchange (DSE).
The company’s vice-resident for corporate affairs, Deo Mwanyika, told local press that ABG expects to cross-list on the DSE in the last quarter of 2011 after receiving approval from the Capital Markets and Security Authority. The company won’t raise new funds, he aded, but rather sees the listing as an opportunity to encourage local ownership of the business, which he says will grow outside of Tanzania via acquisition in the coming years.
Tanzania's Precision Air also plans to join the local market in early December. The company could rise up to TZS28bn (US$16mn) in a share offering marketed to local and international investors.
Is there enough investor appetite for these and other deals to succeed? Not everyone is convinced. One head of investment banking at an African institution points to the list of planned IPOs from Russia earlier his year; most failed, he said, because of poorly targeted valuations. That mistake will likely happen again in Africa, he adds. Companies, and investors, will hope that prediction is wrong.