President William Ruto’s government has granted Uganda powers to determine the hiring and firing of the Kenya Pipeline Company (KPC) chief executive officer. This has been done in a bid to get Uganda to invest in KPC Initial Public Offer which has been struggling to attract investors.
According to a report on this deal that published in the local business newspaper, Business Daily, President Ruto’s government has also allowed Uganda power to approve any future issuance of shares in KPC. In addition to this, Uganda will also get two seats in the board of KPC.
It has emerged that President Ruto’s government gave in to Uganda’s demands after the country threatened that it would pull out of the KPC IPO deal in which it was expected to invest Sh20 billion.
“So long as the [Uganda] Cabinet Secretary Treasury holds any shares in the company, the following matters shall require the approval of not less than two Treasury directors… The appointment or removal of the managing director and the issuance of new share capital,” the daily quoted the amended articles of association.
The IPO went live at the Nairobi Securities Exchange (NSE) on January 19. It was last week extended by three working days after signs that it had failed to attract adequate investors.
The IPO has been claimed to be overvalued by some investment analysts, with Sterling Capital placing the value of the KPC shares on sale at Sh4.4 per share based on discounted cash flow model and Sh2.8 per share based on dividend discount model, and an overall fair value estimate of about Sh3.7 per share.
According to the IPO prospectus, the government has allocated the public 60 percent of the 11.81 billion shares that are on offer.
If this allocation is fully subscribed, the government will collect a total of Sh106.3 billion, from which gross transaction advisers and other agencies involved shall redeem Sh3 billion in earnings.
In the IPO, stockbrokers and investment will be some of the biggest gainers with Sh1.59 billion earnings in fees.
In this trade, the National Treasury appointed 22 intermediaries to handle the sale. These were Faida Investment Bank which shall also be paid Sh98.6 million for leading the transaction in addition to the placement fee.
Others were Dyer & Blair Investment Bank which is the lead sponsoring broker, and Francis Drummond which is a co-sponsoring broker. At the same time, the National Treasury enlisted the Co-operative Bank of Kenya, KCB Bank, and Stanbic Bank as the receiving banks.
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Co-op Bank will pocket Sh9.96 million, KCB Bank Kenya Sh3.6 million, and Stanbic Bank Kenya Sh2.78 million. PriceWaterhouse Coopers LLP shall pocket Sh13.45 million as the IPO’s reporting accountants.
At the same time, the transaction’s legal advisers TripleOKLaw Advocates and G&A Advocates LLP will receive a fee of Sh31.9 million.
Apex Communications and Belva Digital who were given the roles of public relations and advertising agencies will be paid Sh42.13 million and Sh12.26 million respectively.
The National Treasury will also pay Sh40 million in advertising fees, Sh6.25 million in printing costs, and Sh12.5 million as other fees. It will also pay the Capital Markets Authority Sh30 million in IPO approval fees, and Sh1.5 million to the Nairobi Securities Exchange as listing fees.
