Un­sure in­vest­ment en­vi­ron­ment re­duces IPO placings

South Africa had three do­mes­tic listings, which raised a to­tal of $250m on the JSE so far.

The Star Early Edition - - BUSINESS REPORT - Di­neo Faku

THERE were no cross-bor­der ini­tial pub­lic of­fer­ings (IPO) in Africa in the first half of 2017 for the first time in five years, as po­lit­i­cal and eco­nomic in­sta­bil­ity weighed heav­ily on the con­ti­nent, global law firm Baker McKen­zie’s lat­est Cross Bor­der IPO in­dex said.

“Busi­nesses sim­ply do not carry out IPOs if they are un­sure of the in­vest­ment en­vi­ron­ment,” Wildu du Plessis, Head of Africa and Part­ner in the Bank­ing & Fi­nance Prac­tice at Baker McKen­zie in Jo­han­nes­burg said.

Baker McKen­zie’s Cross-Bor­der IPO in­dex dropped to 12.6 points, re­flect­ing that cap­i­tal rais­ing from cross-bor­der IPOs ac­counted for barely 14 per­cent of the value of global equity cap­i­tal raised, the low­est level since the first half of 2012.

The In­dex re­leased yes­ter­day also showed that five com­pa­nies in Africa, three of which were South African had raised $512 mil­lion (R6.8 bil­lion) so far in 2017 from do­mes­tic listings, com­pared to eight com­pa­nies that had raised $492m in the first half of 2016.

It was, how­ever, down from the $596m raised from seven do­mes­tic deals in the first half of 2015.

Vodacom’s Tan­za­nian IPO was the largest of the five. It raised $213m in the first half of 2017, and was also the first com­pany in that coun­try to go pub­lic over the past five years.

“The IPO in Tan­za­nia points to a fu­ture trend in the East African re­gion, which is look­ing in­ter­est­ing in terms of the pos­si­bil­ity of fu­ture IPOs. Kenya is cur­rently go­ing through elec­tions, but we hope to see in­creased ac­tiv­ity in the East African re­gion once they have worked through this pe­riod of po­lit­i­cal un­cer­tainty,” Du Plessis said.

South Africa had three do­mes­tic listings, which raised a to­tal of $250m on the JSE so far this year – the high­est amount of cap­i­tal raisied by South African com­pa­nies recorded dur­ing the first half of any year since 2012.

The listings com­prised two IPOs in the fish­ing in­dus­try, namely Sea Har­vest, a fresh and frozen fish com­pany, which had delisted on the JSE 17 years ago, and new kid on the block, Premier Fish­ing, which de­buted on the JSE in March.

The other South African IPO was Bid­vest founder Brian Joffe’s pri­vate equity fund Long4Life, which listed on the JSE in April.

“His­tor­i­cally, South African com­pa­nies are not ac­tively list­ing out­side their ju­ris­dic­tion. The last time a South African com­pany listed on a stock ex­change out­side of the coun­try was in the se­cond half of 2013, when MiX Telem­at­ics went pub­lic on the New York Stock Ex­change and raised $116m,” said Du Plessis.

Du Plessis ex­plained that the two IPOs in South Africa’s fish­ing sec­tor point to a read­just­ment and con­sol­i­da­tion in the sec­tor after re­cent woes.

“Fur­ther, the Long4Life IPO shows that there is pri­vate equity money avail­able for in­vest­ment in Africa. If a fund can iden­tify suf­fi­cient as­sets to in­vest in, then an IPO is a good way for them to raise cap­i­tal. We haven’t seen a lot of these kinds of IPOs in Africa re­cently, pos­si­bly be­cause the funds have been strug­gling to find as­sets to in­vest in.”

Egypt’s Raya Con­tact Cen­ter, which pro­vides out­sourc­ing ser­vices to Europe and the Mid­dle East, raised $49m when it listed in April.

The in­dex also said that deal mak­ing had not quite re­turned to the lev­els of 2015 – to­tal cap­i­tal raised be­ing 24 per­cent lower in the first half of 2017.

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