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19 Jun 2019, Stella Zlatareva, EMIS M&A Team

London Stock Exchange Calling

“The tale of Africa and London Stock Exchange (LSE) has been intertwined for a very long time", says Ibukun Adebayo, the bourse’s head of Equity Primary Markets, Africa.

Indeed, since 1938 when the first African firm listed on the LSE, many more have followed its example. As of November last year, 110 companies based in Africa were listed or trading in London with a market capitalization of USD 197bn. At this volume, the LSE is the international exchange with most African representatives, and in terms of worth of the companies listed, it is trailing only behind Johannesburg. There is a rationale behind pursuing IPOs and bond offerings in each of these markets. While London can certainly help catapult a company that has embarked on an international expansion programme, its South African counterpart is much more attractive to firms whose ambitions are to grow within the continent.

The London listing pipeline is currently quite impressive. Most visible on the horizon is the IPO of Airtel Africa, the local subsidiary of Indian telecoms giant Bharti Airtel. The company, which operates in 14 African markets, is eyeing some USD 750mn in proceeds. In the cement industry, the largest listed Nigerian company Dangote Cement is mapping out a secondary offering in London, possibly taking place in 2020. When it finally materializes, the deal will be a long time coming as Dangote Cement (owned by Africa’s wealthiest man Aliko Dangote) has been preparing for it for the past six years. In the meantime, in Kenya, London officials are working to arrange the dual listing of the National Oil Corporation of Kenya in Nairobi and London.

Highlighting its commitment to attracting more listings from the region, the LSE has sent officials to many African cities, including Nairobi, Luanda, Abidjan, Cairo, and Casablanca, and a roadshow was completed two months ago in South Africa. The goal of all these visits is to convince of the LSE’s merits. The bourse already has partnerships for dual listings with the exchanges in Nigeria and Kenya. The trips come in light of the bourse’s second edition of its annual publication of the Companies to Inspire Africa report, which singles out 360 of the continent’s most high-growth private firms, ranging from start-ups to well-known corporations. The most represented sectors, making up half of the selection, are consumer services, industry, and agriculture. Many companies mentioned in the same report from 2018 have already started pursuing various growth strategies, such as IPOs, bond issuances, and cross-border deals.

Other proofs of the LSE’s Africa strategy include its recent commitment to develop capital markets infrastructure in Ghana, the provision of trading technology to Botswana, Egypt and Tanzania, as well as plans to help African regulators bolster their market classification. Two easily identifiable problems for African firms can be observed, one imminent and one longer-term. The main obstacle before LSE-bound corporates is the high cost of listing on such a prestigious exchange. The other one is Brexit. While the LSE claims that merely 9% of companies listed there are from Europe, a less visible issue is the fact that the UK, through the Customs Union, has been influencing other EU member states to be more open about African trade and investment. However, once the outcome of Brexit is clear, there is no guarantee that the LSE will keep championing African investment instead of opting for easier, more lucrative deals with larger economies.

The hope is that in the future the intent would rather come from the companies themselves. As Nairobi Securities Exchange CEO Geoffrey Odundo nicely put it, “Every entrepreneur’s dream is to go public. We are yet to get to that realization in Africa.” Original source: EMIS - DealWatch