Category Archives: london

Why African firms list at London

“Fundraising via small cap IPO” was the title of a webinar last week, that was hosted by Jonathan Nelson of HF Capital and which featured Gokul Mani and Ope Sule, both of the London Stock Exchange (LSE).

In nine months of 2021, London has had 81 IPO deals that have raised $20 billion. It is one of the top 3 global exchanges after the USA and Hong Kong, but London is the largest international market (of the 2,000 listed firms, 700 are not from the UK), while the others mainly comprise local firms. 

There are 160 African firms on the LSE and these include Airtel Africa,  VivoJumia and Acorn.

Why list at London?

  • Firms will get the right price: With $100 million assets, a company can raise $35-40 million
  • A listing makes it easier to raise more money; when a company is private it can spend 6 months raising money. But once listed on the LSE, it can raise $30-40 million overnight 
  • 30% of LSE firms are listed on 2 or 3 other exchanges.  London partners with Nigeria and South Africa exchanges so if a company lists in London, it doesn’t have to provide too much additional information to list on South Africa with a bit more in Nigeria.  
  • To list at London, a company should be valued at about $50-70 million for the Aim board and $150-200 million for the Main one. 
  • Compare this to the US where a company needs to aim for a $5 billion valuation. If this is lower than $3-4 billion, the US is not for them, but London will give that investor appetite. 
  • London is primarily institutional and by fundraising there, companies are dealing with professional money managers while China is mainly retail (45-50%)  as well as the US (30-45%), London retail is 10-12%.
  • London can value technology firms, unlike (African) local markets – and most of the technology firms raising money this year are loss-making, but the market can still price them.

What firms will need to do? 

  • It costs a lot to raise money in terms of the time to meet investors and do roadshows. 
  • To raise $10-20 million, the fundraising cost is 5-6%, but for a larger target of $100 million, it would be 2.5-3.5%. 
  • Firms are advised to hire a public relations (PR) as well as investor relations (IR) firms that are based in London – spending $200,000 a year for these.

Kenya Eurobond 2021 A to Z

Kenya’s 12-year Eurobond, in which the Government sought to raise $1 billion, attracted offers worth $5.4 billion after a three-day virtual roadshow with European investors.

Here’s a peek at a draft 223-page prospectus

Advisors to the National Treasury were Citigroup and J.P. Morgan Securities as book runners, co-managers were NCBA and I&M banks, Citi was also the paying agent and registrar, while legal advisors were Dentons, White & Case, Dentons Hamilton Harrison & Matthews and Coulson Harney.

Banking: The Central Bank regulates all mobile phone-based banking products offered by banks.

The government will not participate in the recapitalization of the National Bank of Kenya and plans to divest from commercial banking.

Debt rescheduling: During Covid, Kenya secured debt suspension relief from eight out of its 10 Paris Club member creditors, and China for a total of Kshs 38 billion of 68 billion requested, to free up liquidity for Covid-19 pandemic-related expenditures.

Default: Is non-payment of the principal for 15 days after it falls due or interest for 30 days after the due date. Also if Kenya ceases to be a member of the IMF or default on another security by $25 million.

Litigation: Any disputes shall be resolved under arbitration rules of the London Court of International Arbitration and shall be lodged through the High Commissioner of Kenya in London.

London Bond Listing: An application has been made to list and trade the notes on the London Stock Exchange. Notes are in denominations of $200,000

Past Eurobonds: In 2014, Kenya raised an aggregate $2.75 billion through dual-tranche 5- and 10- year Eurobonds. In 2015, Kenya had $750 million syndicated loan with a consortium of banks and in February 2018, Kenya issued its last Eurobond, a $2.0 billion one comprising a 10-year tranche and a 30-year tranche.

In April 2019, the Auditor General issued a special audit report on the 2014 Eurobond and found the funds were fungible utilized but some were spent outside the Government’s IFMIS.

Purpose: The Kenya Government intends to use the funds for general budgetary expenditures.

Repayments are made in US dollars.

SGR: In January 2021, Kenya secured a debt suspension from China of a loan by Eximbank to fund Kenya’s SGR. US$378 million, will be repaid over five years, after a grace period of one year, in ten equal, semi-annual installments.

The Kenya Electricity Transmission Company recently signed a contract with China Electric Power Equipment and Technology Company for the electrification of this section of the Mombasa-Nairobi railway.

Subscription: In case, the bond was under-subscribed, Citigroup, J.P. Morgan, I&M and NCBA would have filled the gap.

Taxes: All payments are made, without deducting withholding tax. Also, interest payable on the notes has been exempted from income tax and capital gains tax in Kenya.

BA 2119: The Flight of the Future exhibition

A guest post by Elsie Kibue-Ngare.

I was fortunate enough to be invited/gifted a ticket to an interactive exhibition by British Airways in collaboration with students from the Royal College of Art (RCA) at the Saatchi Gallery as they showcased the future of flying in the next 100 years.

This year, British Airways is celebrating its 100th Anniversary as being part of a predecessor company AT&T (Air Transport & Travel Ltd) and this exhibition is a celebration of that long history by looking at aviation through history via FLY, an interactive, multisensory, virtual reality experience that turns you into a time traveller from being a bird, into Leonardo Da Vinci’s studio in Florence all the way to 100 years into the future to what aviation might look like with an aircraft that is guided to land by sight as one of the possibilities of air travel.

Together with FLY, eight other concepts were showcased at the exhibition. These included:

  • AVII (AVY), which I particularly liked as a concept to improve the experience of travellers using Artifical Intelligence (AI) in collaboration with cabin crew. The idea is to submit your needs as you book your flight, for example, if you have particular dietary needs and this information is fed back to the cabin crew who in return provide personalised service throughout your flight without even you asking.
  • Another concept, TASTENATION, uses data collected from DNA and body health to 3D print food for a new multi-sensory in-flight dining experience. This idea does away with food waste as meals are prepared from scratch onto edible cutlery and plates. Yet at the same time provide the necessary nutrients whilst on the air as it prepares the body to adjust to the cuisine of the traveller’s destination.
  • In line with reducing waste, THE FUTURE OF LUGGAGE is another concept that can also be realised. The vision where travellers would travel without any luggage as they will have to upload their clothes onto a digital wardrobe together with their measurements and depending on the weather, duration of their stay, etc. and the idea that you would arrive at your destination and find a set of clothes waiting for you at the airport lounge at your destination is pretty awesome. Clothes will be made from recycled materials that at the end of your trip, you drop them off at the airport where they are recycled.

There was so much to detailing to see at this exhibition from personalised wearable seats called AIRWEAR, to flying green with AERIUM, where the air we breathe and the water that we drink whilst flying is generated through bioavionics systems integrated as part of the plane. CURIO, a hypersonic modular aircraft with zero emissions and weird seating is one I did not get. And so did AER, a shape-changing smart luggage transportation concept.

Of the concepts, I saw at the exhibition, AVII(AVY), AERIUM, TASTENATION and THE FUTURE OF LUGGAGE looked like the ones that are likely to happen in the near future leading up to 2119 with the other concepts looking very unlikely, but I could be wrong and years beyond 2119, these other concepts could be a reality for many.

All in all, it was amazing to see how history and the advancement of technology inform us of the ideas and innovations of what is yet to come.

Airtel Africa – London prospectus peek

By the end of the week Airtel Africa will have a dual listing at the London Stock Exchange with a secondary one in Lagos after raising $750 million, by offering new shares to investors at 80 pence per share in June 2019, and valuing the company at £3.1 billion (~$3.9 billion).

The goal of the listing was to reduce the debt of the company further after it had earlier raised $1.25 billion from six global investors including Softbank, Warburg Pincus and Temasek in October 2018.

A peek at the 380-page prospectus and other listing documents:

About Airtel Africa: As at 31 December 2018, the Group was the second largest mobile operator in Africa, by the number of active subscribers(according to Ovum); they had 99 million mobile voice customer and 30 million mobile data one and 14.2 million mobile money customers.

Performance: For the financial year 2019 they had $3.01 billion revenue with 1.1 billion from Eastern Africa, $1.1 billion from Nigeria and $900 million from the rest of Africa. Of the total revenue, $2.9 billion was from mobile services with $167m from mobile money. Eastern Africa is Kenya, Uganda, Rwanda, Tanzania, Malawi and Zambia, and the rest of Africa comprises operations in Niger, Gabon, Chad, Congo, DRC, Madagascar and Seychelles. The company had a pre-tax profit of $272 million compared to a loss before tax of $9 million in 2018.

Managers & Employees: The Company has ten non-executive directors (including the Chairman). Also, Raghunath Mandava and Jaideep Paul will serve as chief executive officer and chief financial officer of the Group from their operational head office for Africa based in Nairobi. They will be enrolled in a company long-term incentive (share option) plan along with other executives of the Group.

Shareholders: Prior to the listing, top shareholders were AAML – a subsidiary of Bharti Airtel (68.31%), Warburg Pincus (7.65%) Singapore Telecom (Singtel 5.46%), ICIL – a Bharti Mittal family group (5.46%),  Hero (owned by Sunil Kant Munjal – 4.37%) and the Qatar Investment Authority (QIA) with 4.37%.

After the listing, in which the company will have sold between 14% and 18.9%%, the top shareholders will be AAML (56.12%), Warburg Pincus (6.28%) Singtel (4.49%), ICIL (4.49%),  Hero (3.59%) and QIA with 3.59%).  Also, subject to completion of a merger deal in Kenya, Telkom Kenya may acquire up to 4.99% if they exercise a flip-up right.

Other: 

  • Results for the (London) global and Nigeria uptake were announced on 28 June, and share accounts of new investors will be credited from July 3 and listed in London that day, and in Nigeria on July 4. 
  • Like other telco’s in Africa, 96% of their customers are prepaid. ARPU was $2.72 per user in 2019, down from $3 in 2018 and $3.24 in 2017.
  • Airtel has two distinct strategies; where they are market leaders (e.g in Chad), they price closely to market rates and where they are seeking market leadership (e.g in Kenya), they prioritize affordability.
  • Other Financing: In May 2019, the Company arranged for a “New Airtel Africa Facility” bank facility with Standard Chartered.
  • Other Deals: Ongoing settlement discussions in Tanzania, one over a tax claim, will see all cases withdrawn and boost the Government’s shareholding to 49% at no cost. In Kenya, they are merging with Telkom Kenya and in Rwanda, they are acquiring Tigo.
  • Listing Fees: The company will pay the fees and expenses for the listing totalling $35 million for the UK admission – and these include FCA fees, bank’ commissions, professional fees, costs of printing and distribution of documents.  The joint global co-ordinators and joint bookrunners were  J.P. Morgan Cazenove and Citigroup, joint bookrunners were Absa, Barclays, BNP Paribas, Goldman Sachs, HSBC, Standard Bank, the Nigerian joint issuing houses were Barclays Securities Nigeria and  Quantum Zenith Capital, while the public relations advisor was Kekst CNC.

About Airtel in Kenya:

  • Airtel is the second-largest telco in Kenya with 13.1 million subscribers and market share of 28%.
  • Telkom Kenya is expected to acquire a shareholding of 32% in Airtel Kenya in an ongoing business transfer deal. 
  • The company is working with Kenya’s Central Bank to reverse a negative (Kshs -2.7 billion) capital position as a requirement to be part of the national payment system. They expected to lose another Kshs 1.2 billion this year.
  • Airtel has proposed to separate the mobile money business from the telecommunication one and fund the new one with shareholder loans. They had committed to recapitalize the company by Kshs 3.85 billion ($38 million) by August 2019.

African Companies Foreign Listings

The listing of Jumia on the NYSE has elicited many discussions about how ‘African’ it is to qualify for the moniker of “first African tech IPO”.

London has been the listing home of many large African companies in the oil, gold, mining space for many years. It has also recently come to attract more banks, Eurobonds and Diaspora bonds. There are 119 African companies listed in London including top Nigerian banks while sovereign bonds of 11 African countries trade on the LSE.

Other recent listings have gone to foreign markets including:

  • Vivo Energy’s LSE listing in 2018, which was the largest IPO of the year in London.
  • In Nigeria, which is Jumia’s largest market, here’s an investor recap of all the listed ‘tech stocks’ on the Nigerian Stock Exchange which include Courteville, Triple Gee, NCR, eTranzact, CWG, Chams, and OMATEK.
  • After spinning off Multichoice, Naspers plans to list its international internet assets on the Euronext Amsterdam Exchange with a secondary listing in Johannesburg. The assets include companies like PayU, Souq, Flipkart (which was sold to Walmart in 2018), Tencent, and Mail.ru. It only makes 4% of its revenue in South Africa and accounts for 23% of the Johannesburg All-Share SWIX exchange. By listing 75% of the company in Amsterdam, this will reduce its weight in the South African exchange. Safaricom is in a similar situation in Kenya, accounting for about 40% of the value of the Nairobi Securities Exchange, but as its revenue is currently all from Kenya, a listing move away is unlikely.
  • Within Africa, the island nation of Mauritius is an attractive listing country and is considered a gateway to India and Africa for many venture funds. Listing there confers benefits including no capital gains or dividend taxes, and Mauritius can also grant residency to people who invest over $500,000.

Other foreign listings planned include:

  • Airtel’s listing of its’ business in 14 African countries is expected to be another large London blockbuster.
  • Kenya’s National Oil is a long-shot to be listed in London and Nairobi.
  • Dangote Cement which accounts for about a third of the Nigerian Stock Exchanges market capitalization plans a secondary listing in London later in 2019.
  • MTN is expected to list a share of its Nigeria subsidiary once a tax dispute matter is resolved.