London Stock Exchange
From The Financial Times
Nigeria might be trying to lure local companies into listing on its stock exchange, with floatation activity set to increase – but it’s not the only one. London is stepping up its efforts too for listings in tandem.
As the Nigerian Stock Exchange scrambles to regain the ground it lost after the equities bubble bust in 2008 sparking a spectacular $50billion crash, Nigerian groups are also being tempted by London’s broad investor base and liquidity.
The London Stock Exchange (LSE) is actively looking to add Nigerian companies to its roster and is in discussions with its Nigerian counterpart to simplify the dual listings process, allowing immediate trading and settling of securities in both markets.
The LSE’s Head of Business Development for the Middle East and Africa, Ibukun Adebayo, said: “The level of interest in the country from global investment houses operating out of London has grown significantly, particularly in the last couple of years. There’s been a distinct pick up in terms of the value that African countries see in having a LSE listing.”
The result is that the pipeline of Nigerian companies now preparing for initial public offerings in London “has grown significantly compared to this time last year”, he added, without naming groups.
For businesses that have outgrown their own bourse the attraction is greater than a new realm of investors.
“It’s about more than just capital raising. It’s about profile building, the binding effect of meeting higher regulatory standards, plus London’s ability to adequately price risk from this part of the world,” Adebayo explained.
There are five companies either incorporated or operating in Nigeria now quoted on London markets, worth a total of $3.5billion. This September, the West Africa-focused energy group Eland Oil & Gas became the largest company to float on the LSE’s smaller market AIM, raising $188million after it partnered local oil firm Starcrest to buy a stake in a Nigerian oil block.
Zenith Bank, one of Nigeria’s leading lenders, also said last week that it planned a secondary listing in London, which will be facilitated by JP Morgan pending shareholders’ approval on November 21. It follows other top-tier financial institutions Guaranty Trust Bank and Diamond Bank.
Africa’s richest man, Aliko Dangote, is aiming to float a 20 per cent stake of his $11billion cement business next year – the first listing of one of his companies outside Nigeria. But Dangote Cement is grappling to meet the LSE’s stringent main market corporate governance requirements, with analysts predicting that it will make it to market in late 2013 at the earliest.
“Dangote, if finally completed, will be the first Nigerian name to have a direct listing in London,” said Equity Research Analyst for Sub-Saharan Africa at Exotix, Andy Gboka.
And it’s not just about London’s Equity Markets. $478million of UK-listed bonds were issued out of Nigeria last year.
Companies from across Africa have growing representation on London markets. A total of 98 African businesses are listed on the LSE – the majority on AIM. With a total market capitalisation of $70billion, the London Exchange is the biggest market for African companies outside of Johannesburg. UK-based investors have tended to have a bigger appetite for emerging market assets than their South African counterparts, analysts point out, and African companies have raised more than $5.7billion since 2008.
There is more activity to come. “Our pipeline is active and stronger than it was last year, when we had flotations from 23 companies from Africa, which raised about $637million,” Adebayo said.