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African firms to launch more IPOs

By on March 2, 2016

African companies are likely to launch more than a dozen initial public offerings this year, defying commodity price drops and capital flight from emerging markets, Baker & McKenzie has said

If transactions in the pipeline are concluded, they are likely to raise $3.1bn, about $1.5bn more than the amount raised last year by 21 IPOs on the continent, Baker & McKenzie, a leading law firm by deal count for mergers and acquisitions in emerging markets, said in a statement on Monday.

The projected amount to be raised would be the highest since 2010, the law firm said, adding that a lack of demand at home could force companies to seek dual listings abroad to expand the pool of investors, Reuters reported.

“Fifteen IPOs are already in the pipeline, with one, Nigeria’s Interswitch, which processes payments for banks and operates in five African countries, could be Africa’s first billion-dollar IPO,” the firm said in the statement.

Other IPOs expected included the self-listing of the Dar es Salaam Stock Exchange, Botswana Telecoms and real estate fund Tadvest’s dual listing in Mauritius and Namibia, Baker & McKenzie added.

“The wider continent still faces challenges and there is little local institutional investment or retail demand other than in the biggest economies,” the Head of the firm’s capital markets practice for Europe, Middle East and Africa, Edward Bibko, said.

“This means larger companies have to ‘dual-list’ in a global financial center like London, as well as their home market.”

Private-equity companies amassed a $4.3bn war chest for investment opportunities in Africa last year as the global commodity rout and weakening local currencies cut prices of potential target companies, according to Bloomberg.

The fundraising has been the highest since 2010 and compares with $1.9bn in 2014, according to the London-based African Private Equity and Venture Capital Association. The industry group represents investors such as Dubai-based Abraaj Group Limited, which raised $990m in its Africa Fund III, and London-based Helios Investment Partners LLP with $1.1bn in its Investors III Fund.

As commodity prices collapsed around the world over the past year, the South African rand tumbled 26 per cent against the dollar, the Zambian kwacha is down 40 per cent and the Mozambican metical lost 31 per cent. Nigeria is under increasing pressure to devalue the naira, with forward currency markets predicting it will weaken by 20 per cent over the next three months.

“We’re trying to look for companies that benefit from a weaker currency, that are capable of exporting,” said Shaun Zagnoev, a partner at Ethos Private Equity Limited in Cape Town. The company raised $800m for its latest Fund VI.

 

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