Kenyan Investors Line Up for a Potential Sh65 Billion Stake in Dangote Refinery IPO. What are the Numbers Behind the Deal?

Kenya’s capital markets could mobilise as much as $500 million, about Sh65 billion, for the planned listing of Nigeria’s Dangote oil refinery, with strong interest expected from local institutional investors. Reuters, citing a source familiar with the transaction, reported that appetite in Kenya was “tremendous”, particularly among pension funds. The refinery is seeking about $5 billion through an initial public offering expected to conclude in October, potentially making it Africa’s largest IPO. Its primary listing is planned for the Nigerian Exchange, but Dangote is also looking beyond Nigeria for investors. Exchanges in Kenya, South Africa, Egypt, Ghana and Rwanda have held talks with the refinery’s advisers in recent months on how investors in their markets could participate.

Questions over $40bn valuation
A $2.5 billion private placement for a six percent stake last month implied a valuation of around $40 billion for Dangote Refinery, providing an early benchmark ahead of the planned IPO. That valuation is significantly higher than those of some listed refiners with similar processing capacity. Turkey’s Tüpraş, whose four refineries have roughly the same combined capacity as Dangote, is valued at about $12 billion, while US-listed HF Sinclair, with capacity of approximately 678,000 barrels per day, has a market value of about $16 billion.
The comparison does not necessarily mean Dangote is worth the same as its peers, but it shows the premium investors may be asked to accept. The refinery currently processes as much as 650,000 barrels per day and plans to expand capacity to 1.4 million barrels per day, making its growth prospects an important part of whether investors ultimately support a valuation close to the $40 billion implied by the private placement.

How Kenyan investors could participate
With the ordinary shares set to list only in Nigeria, Kenya and other regional markets would need alternative structures through which their investors could participate. The options being considered include global depositary receipts and exchange traded instruments that would mirror the Nigerian listed shares and carry rights to future dividends.
What has not yet been decided is how investors in those markets would participate in the IPO or how shares would be allocated to them. Regional markets could receive pre-allocations, underwrite part of the offer or participate through an open offer in which allocations would depend on overall demand.