/ 7 May 2008

Foreigners to pay 10% premium for Safaricom

Foreign investors buying Kenya’s Safaricom stock will pay a 0,5 shilling premium per share over the five Kenya shillings that domestic investors will be paying, the government announced on Wednesday.

”This represents a 10% premium to the local offering price, an unprecedented structure and premium level when compared to past transactions around the world,” Kenya’s privatisation commission said in a statement.

The offering generated over $1,25-billion in bids from established institutional investors, the commission said.

”The IPO has far exceeded the goals laid out at the launch of this process, namely, deepening Kenya’s capital markets, maximising revenues for the Treasury and increasing international investor interest in the Nairobi Stock Exchange,” it said.

The government is selling a 25% stake in the cellphone operator, one of Kenya’s most profitable firms, and expects to earn at least 50-billion shillings from the IPO.

The offer is a gauge of investor confidence in Kenya after President Mwai Kibaki’s disputed December re-election, which triggered ethnic clashes that killed at least 1 200 people, left 350 000 homeless and damaged the tourism and transport sectors.

Local investors have been allocated 65% of the 10-billion shares on offer and thousands applied.

”With regard to the local tranche of the transaction, initial indications suggest that more than 750 000 applicants participated in the IPO generating almost 115-billion shillings in local demand,” the statement said.

The government has a provision to take back up to 15% of the 35% offered to international investors and give it to local buyers if the local offer is oversubscribed by more than 200%.

Final results in the local pool will be known only over the next few weeks once the application processing is finished. Preliminary figures show that the local investors have oversubscribed the share offer by close to 254%.

Should international investors get their entire 35% and locals the rest, Safaricom will be valued at 207-billion shillings.

The privatisation commission said once completed, Safaricom will be the largest IPO in sub-Saharan Africa, overshadowing those of South Africa’s financial services firm Sanlam, and Telkom SA.

Safaricom has more than 9,5-million subscribers or about 80% of current subscribers in the nation with a population of 36-million.

Britain’s Vodafone owns 40% of Safaricom, while the government owns the rest. After the IPO, the government will own 35%. – Reuters