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Retail Investors Adopt SPVs for Airtel’s N325.25b IPO

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  • Retail Investors Adopt SPVs for Airtel’s N325.25b IPO

Retail investors have opted for the use of special purpose vehicles (SPVs) to aggregate funds and buy into the ongoing initial public offering (IPO) by Airtel Africa Plc.

Airtel Africa Plc is raising up to N325.25 billion in a combined global and Nigerian IPOs. Airtel Africa, the parent company of Airtel Networks Limited, Nigeria’s second largest telecommunication company, plans to list its shares on the London Stock Exchange (LSE) and Nigerian Stock Exchange (NSE).

Airtel Africa, a subsidiary of India’s Bharti Airtel Limited, is offering between 501.13 million ordinary shares of $1 each and 716.41 million ordinary shares of $1 each at indicative price range of between N363 per share and N454 per share.

The IPO, being undertaken through a book building, is, however, restricted to qualified institutional investors and high net worth investors (HNIs). Under the rules in Nigeria, a high networth investor is defined as an individual with net worth of at least N300 million excluding automobiles, homes and furniture. This implies that only individuals and institutions with a minimum assessable investment of N300 million can participate directly in the IPO.

The IPO, which opened on June 18, 2019, is scheduled to close on Thursday June 27. The announcement of offer price, offer size, publication of the pricing statement and allotment of ordinary shares will hold on June 28, 2019. The allotment of ordinary shares and crediting of ordinary shares to the Central Securities Clearing System (CSCS) accounts of successful subscribers will take place on June 29 and July 3.

Airtel Africa is scheduled to be admitted to the official list and begin trading on the NSE on July 4. Already authorities at the NSE and Securities and Exchange Commission (SEC) have approved the listing of the resultant shares.

Checks indicated that investment houses have created SPVs which are aggregating subscriptions from retail investors. While the arrangements differ slightly, the investment firms appear to be using the same template for the SPVs, suggesting a sort of industry consensus on the approach to bypass the high net worth restriction.

Under the arrangements, the SPV will aggregate demand from retail investors and use its net worth to subscribe to the shares on behalf of the retail investors. Once successful and its account credited with the IPO shares, the investment firm will cross the shares into the CSCS accounts of the retail investors at the commencement of trading on the NSE.

The minimum share subscription by most SPV is 500 ordinary shares while the price is fixed at the ceiling of N454 per share, implying a minimum subscription of N227,000. Under the terms, the in-house allocation may be done on a pro-rata basis in the event of under allotment of the full subscription while the retail investors will bear all transfer charges. However, in the event that the clearing price is lower than N454, the excess amount will be refunded to the investors.

Experts who spoke on the SPVs said there was nothing legally wrong with the use of SPV to bypass the high net worth restriction, noting that the SPV is similar to collective investment by all the retail investors.

Nigerian market has substantial retail investors. Latest data from the NSE indicated that domestic retail investors accounted for 42 per cent of total domestic transactions at the Nigerian equities market. The five-month report ended May 31, 2019 showed retail investors led the market in two months.

SPVs are using attractive dividend policy to woo retail investors, who characteristically are usually excited by dividend-paying companies. Airtel Africa aims to distribute a minimum of 80 per cent of its consolidated free cash flow to its shareholders as cash dividend, subject to a ratio of net debt to underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of between two times to 2.5 times being maintained. Dividend distribution is also subject to all regulatory, statutory and monetary restrictions.

The net proceeds from the IPO will be used to offset the company’s debt. The board of Airtel Africa said the IPO and the listing on the NSE would encourage operational discipline through the establishment of an independent capital structure and governance framework following the successful turnaround of the group’s operations.

According to the company, the IPO and listing would facilitate measurement of the group’s continued positive performance against holistic, publicly disclosed metrics as it enters a strong free cash flow phase.

The company is also expected to enter an optimal capital structure and enable improved leverage for greater flexibility in pursuing growth opportunities going forward while also having access to the capital markets and diversification of its capital base to support continued growth.

While the Nigerian offer shall be issued in Naira, Airtel Africa has avowed that the rights attaching to the shares allotted under the Nigerian offer shall be uniform in all respects and they will form a single class for all purposes, including with respect to voting and for all dividends and other distributions thereafter declared, made or paid on the ordinary share capital of the company.

According to the company, on a show of hands every holder of ordinary shares in the capital of the company who is present in person shall have one vote and on a poll every shareholder present in person or by proxy shall have one vote per ordinary share.

Airtel Africa added that except as provided by the rights and restrictions attached to any class of shares, shareholders will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings.

“There are no restrictions on the free transferability of the Nigerian offer shares,” Airtel Africa stated, adding that no expenses will be charged by the company to any investor who purchases the Nigerian offer shares.

In its prospectus, Airtel Africa however cautioned that shareholders may be subject to exchange rate risk. According to the company, the investment by Nigerians may be subject to exchange rate risks.

“The ordinary shares are, and any dividends to be paid in respect of them will be, denominated in United States (US) dollars however the currency of issue is United Kingdom Pounds Sterling, for the Global Offer, and is naira, for the Nigerian Offer. An investment in the ordinary shares, by an investor whose principal currency is not US dollars, such as Nigerians, is exposed to foreign currency exchange rate risk. Thus, fluctuations in the exchange rate between Pounds Sterling and naira could materially and adversely affect the prices of the ordinary shares listed on the NSE. Any depreciation of US dollars in relation to the Naira currency will reduce the value of the investment in the ordinary shares or any dividends in foreign currency terms,” the company stated.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Dangote Commits $700M To Sugar Production In Support of Backward Integration Policy

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Dangote Sugar Refinery Plc

The management of Dangote Sugar Refinery Plc has said it is committing over $700m to its sugar projects to support the Backward Integration Policy of the Federal Government to make Nigeria self-sufficient in sugar production.

According to a statement issued on Sunday by Dangote Industries Limited, the company disclosed this to visiting members of the Nasarawa House of Assembly on Friday.

The company noted that Nigeria was one of sub-Saharan Africa’s largest importers of sugar, second only to South Africa with an annual import of over $337m.

The Dangote Sugar management however assured the lawmakers that with the completion of its sugar projects in Nasarawa and Adamawa under the BIP, the nation would be saved more than half of the forex expended on sugar imports annually.

It added that the investment would also lift its people as other people-oriented infrastructures would come with the sugar projects.

The state lawmakers commended the Dangote Group for the choice of the state for the project and the accelerated pace with which the project was being executed, despite occasional delays arising from communal disagreements.

General Manager for the BIP, Dangote Sugar, John Beverley said when the factory was fully operational, it would have the capacity to crush 12,000 tons of cane per day, while 90MW power would be generated for both the company’s use and host communities.

He also disclosed that some 500km roads in all would be constructed to ease transportation within the vicinity. He solicited the support of the lawmakers in controlling the menace of land encroachment by settlers and itinerant farmers.

The Speaker of the Nasarawa State House of Assembly, Ibrahim Abdullah, and his team members, who were conducted around the company’s 78,000 hectares BIP in Tunga Awe Local Government Area commended the company for the project.

Abdullah noted that it would not only open up opportunities in the state but in Africa as a whole, and said the lawmakers were ready to partner and support the company towards the realisation of the sugar project through the relevant legislation.

When phase II of the project is completed, according to the company, it will make it the largest sugar refining plant in Africa.

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French Trade Advisors pledge Massive Investment In Lagos Free Zone

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The Conseillers du Commerce Exterieur (French Foreign Trade Advisors) has expressed readiness to invest massively in the Lagos Free Zone (LFZ) being developed by the Tolaram Group as they endorsed the zone as the ideal industrial destination for French businesses in Nigeria.

This was made known on Thursday, April 15, 2021, during a visit to the Lagos Free Zone. The delegation led by the Ambassador of France to Nigeria, His Excellency Jerome Pasquier accompanied by his Economic Advisor, the Consulate General of France in Lagos and the Conseillers du Commerce Exterieur comprising of CEOs of several French businesses in Nigeria.

Speaking during the visit, the Ambassador of France in Nigeria, His Excellency Jerome Pasquier explained that the aim of the visit of the Conseillers du Commerce Exterieur to Lagos Free Zone (LFZ) was to discover the opportunities in the Lagos Free Zone and the Lekki Port project, which is expected to have a huge positive impact on businesses in Nigeria.

Pasquier commended Tolaram Group, the promoter of the zone, for the foresight of integration of Lekki Port into the master plan of the Lagos Free Zone (LFZ), which would serve as the gateway for import and export from the zone thereby giving businesses in the zone a competitive edge.

The Ambassador also commended the Lagos Free Zone (LFZ) for its Master Plan for the zone which includes world-class infrastructure that is in line with its vision to be the preferred industrial hub and investment destination in West Africa.

“I am impressed by the huge size of the Lagos Free Zone project. We are very happy that the French companies will be deeply involved in this Lagos Free Zone project. It is really impressive to see how ambitious this project is. The French Minister was in Nigeria yesterday and I explained to him that Nigeria is a country where we can have big projects. For us, this project means big opportunities and that explains why we need to be here. We are happy to be here and work with Tolaram Group”, he added.

It is noteworthy to mention that the first French company to be established in the Lagos Free Zone is the terminal operations arm of CMA – CGM which has established a subsidiary within the Lagos Free Zone and is the appointed operator for the container terminal operations scheduled to commence at Lekki Port next year.

In his remarks, the Chief Executive Officer, Lagos Free Zone (LFZ), Mr. Dinesh Rathi assured the Ambassador of France and the Conseillers du Commerce Exterieur that the zone remains the best destination for investment in Nigeria and the West African sub-region given the seamless integration with Lekki Port and the world-class infrastructure provided by Lagos Free Zone.

Explaining the configuration of the zone, Rathi disclosed that the clustering is planned in line with the international best practices of Work, Live, and Play. He stated that the land-use plan of the Lagos Free Zone allocates 70 percent area towards industrial developments, 20 percent towards logistics and support services while the real estate will cover the remaining 10 percent.

He also stated that Lagos Free Zone (LFZ) has simplified the process of business entry and operation in the zone in line with the Federal Government of Nigeria’s Ease of Doing Business policy.

“We have made it very easy for the business to berth and take off at zone by making our process less cumbersome and friendly, we are open for business 24/7 and willing to help investors to settle in very fast,” he said.

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AIICO Refutes Claims of Non-Remittance of Pension Assets to PTAD

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AIICO Insurance Plc has refuted claims of non-remittance of pension assets to the Pension Transitional Arrangement Directorate (PTAD).

This was disclosed recently in a statement by Segun Olalandu, the Head, Strategic Marketing and Communications Department.

It stated: “The attention of the Management of AIICO Insurance Plc. has been drawn to a recent report in the media on allegations of non-remittance of pension assets to the Pension Transitional Arrangement Directorate (PTAD).

“AIICO Insurance Plc. hereby wishes to inform the public that all pension assets due for remittance have been duly transferred to PTAD since the year 2017, in full compliance with the directive. Both parties are presently engaged in a reconciliation exercise to conclude the process. We implore the public to disregard any information that may suggest otherwise as there is no basis to that effect.”

Mr. Segun assured that AIICO Insurance Plc. remains a responsible corporate citizen of Nigeria and will continue to engage the best practice in all its business activities and operations in line with extant laws and regulatory provisions guiding its practice.

AIICO Insurance is a leading composite insurer in Nigeria with a record of serving our customers that dates back over 50 years. Founded in 1963, AIICO provides life and health insurance, general insurance, and investment management services as a means to create and protect wealth for individuals, families, and corporate customers.

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