Kenya Pipeline IPO oversubscribed on institutional demand

The initial public offering (IPO) of the state-owned oil pipeline firm in Kenya[Country:{ "assets":{ "country":"KE" } }] has seen strong demand from institutional investors, resulting in an oversubscription that counters previous reports of investor apathy. According to the lead transaction adviser, the sale, which concluded on February 24, aimed to divest a 65% stake in the Kenya Pipeline Company to raise approximately 106.3 billion shillings ($825.31 million). This transaction represents the largest IPO in East Africa when measured in local currency terms. Belgrad Kenne, the lead transaction adviser from Faida Investment Bank, noted that the deal team is currently reconciling the returns, with official results expected on March 4. While declining to specify the exact level of oversubscription or name specific institutional participants, Kenne emphasized that these investors drove excess demand alongside significant participation from retail investors. The offering was priced at 9.00 shillings per share. Despite the reported oversubscription, the IPO faced challenges, including lower-than-expected valuations from some banking institutions and an extension of the initial offer period. Local media reports had previously suggested a lack of interest, raising concerns regarding the future liquidity of the stock on the Nairobi Securities Exchange. Institutional investors, such as pension funds and banks, typically hold shares for longer durations compared to individual retail investors, which can impact trading volumes. The allocation of the 65% stake is structured to include 15% for oil marketing companies and 5% for employees. The remaining shares are divided equally at 20% each for local retail, local institutional, East African, and foreign investors. The government will maintain a 35% ownership stake and retain all proceeds from the sale. In a significant move for regional energy security, the government of Uganda[Country:{ "assets":{ "country":"UG" } }] has confirmed it secured a 20.15% shareholding in the company through the IPO. As a landlocked nation, its neighbor relies heavily on the Kenyan pipeline to transport petroleum products from the port of Mombasa. Uganda's Energy Minister Ruth Nankabirwa stated: > "Imports through Kenya account for over 95% of Uganda's monthly demand, justifying the investment in Kenya Pipeline, which gets 35% of its revenue from Uganda." This divestment is a key component of President William Ruto's broader strategy to reduce state ownership in various enterprises, which also includes reducing the government's stake in the telecommunications operator Safaricom. The pipeline IPO is expected to exceed the 50 billion shillings raised during the 2008 Safaricom offering, although the latter remains larger in U.S. dollar terms due to the historical depreciation of the Kenyan shilling.