Strong demand from institutional investors has led to an oversubscription of the initial public offering of Kenya Pipeline Company, according to the transaction’s lead adviser, pushing back against reports that investors lacked interest.
According to Reuters, the share sale, which ran from January 19 to February 24, saw the government offer a 65% stake in the company to raise 106.3 billion shillings ($825.31 million).
If confirmed, it would become East Africa’s largest IPO in local currency terms. The advisory team is currently reconciling returns from the offer, with results expected on March 4.
Belgrad Kenne of Faida Investment Bank, the Nairobi-based lead transaction adviser, declined to reveal the level of oversubscription or name the institutional investors involved.
He said only that institutional buyers drove the excess demand and that the IPO also attracted “sizeable” participation from retail investors.
The offer was priced at 9.00 shillings per share. However, it faced challenges including lower valuations from some banks, an extension of the subscription period, and local media reports suggesting weak investor interest.
These reports raised concerns that the stock could become illiquid after listing on the Nairobi Securities Exchange, as institutional investors such as pension funds and banks typically hold shares longer than individual investors.
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Of the total shares on offer, 15% were reserved for oil marketing companies, 5% for employees, and the remaining 80% allocated equally among four categories: local retail investors, local institutional investors, East African investors, and foreign investors, each receiving 20%.
The government will retain a 35% stake in the company and will receive all proceeds from the IPO.
Meanwhile, the government of Uganda, which depends on the Kenyan pipeline to transport petroleum products through the port of Mombasa, said it acquired a 20.15% stake in the company through the IPO.
“Imports through Kenya account for over 95% of Uganda’s monthly demand,” Uganda’s Energy Minister Ruth Nankabirwa said at a news briefing on Tuesday, explaining the investment. Kenya Pipeline earns 35% of its revenue from Uganda.
The sale of shares in Kenya Pipeline is part of President William Ruto’s plan to reduce government ownership in state enterprises.
The government is also cutting its stake in telecom operator Safaricom. The pipeline IPO is expected to exceed the 2008 Safaricom share sale, which raised just over 50 billion shillings.
However, in dollar terms, the Safaricom IPO remains the largest in the region due to the depreciation of the Kenyan shilling.
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