Nigerian billionaire Aliko Dangote snatched the Sh42.5 billion Kenya Pipeline Company (KPC) share purchase deal from global oil majors who dragged their feet when presented with the opportunity to acquire the 24.7 percent stake in the newly listed firm.
Mr Dangote, Africa’s richest man, reportedly caught competing investors, largely oil majors, off guard by swiftly accepting the offer to buy the KPC stake from parastatals, underscoring the tycoon’s decisiveness and ability to close deals quickly.
Such decisiveness has become a hallmark of shrewd investors, who have made fortunes by trusting their instincts and making bold calls when others hesitate.
The State-backed agencies, including National Social Security Fund (NSSF), Public Servants Pension Scheme, County Workers Pension Fund and Unclaimed Financial Assets Authority, had a combined stake of 38.35 percent.
Others are pension funds in parastatals such as Kenya Power, KPC and Kenya Ports Authority (KPA).
Their combined stake has been cut to less than 15 percent, altering the ownership of KPC, less than eight months since its listing at the Nairobi Securities Exchange (NSE).
‘When presented with the opportunity, he jumped at it, without long stories on due diligence, agreements, etc. A true dollar billionaire mindset,’ said an insider who helped put together the deal.
With the acquisition, Mr Dangote is now the second-largest shareholder of KPC behind the Kenyan government. He may have also earned himself a seat or two on the board of the newly listed firm.
Those who were reportedly eyeing the KPC stake, the source said, included global oil industry heavyweights from the US and Europe with interests across the upstream, midstream and downstream segments of the petroleum business.
Multiple sources close to the deal reckon the transaction advisers had been in talks with these potential investors for the past two months over the acquisition of the stake from parastatals that participated in KPC’s initial public offering (IPO).
But the ‘big boys’ delayed their decision, laying emphasis on due diligence and legal documentation.
The delay gave Mr Dangote an opportunity to snap up the lucrative stake, potentially giving him influence over critical petroleum infrastructure that could be used to transport fuel from his planned Lamu refinery.
Mr Dangote said on Wednesday that he planned to invest $1.5bn (Sh195 billion) to expand KPC’s pipeline network in the middle of building a second 700,000-barrel-a-day refinery in Lamu worth Sh2.1 trillion, whose initial work the tycoon said had already started.
This represents an ambitious attempt to build an integrated African refining, storage and distribution business, with Kenya serving as a regional hub for East Africa and Namibia for southern Africa.
Kenya Pipeline’s 1,300km network transports diesel, petrol and jet fuel from the port of Mombasa across Kenya, supplying both the domestic market and neighbouring countries, including Uganda, the Democratic Republic of Congo, South Sudan and Rwanda.
In Namibia, Mr Dangote plans to build fuel storage tanks that would more than triple the capacity of the country’s existing national storage facility.
‘We are going very aggressively with that,’ Mr Dangote said in London, in reference to the planned KPC investment that is part of a continent-wide strategy to distribute refined products around Africa.
The State-backed agencies, including National Social Security Fund (NSSF), Public Servants Pension Scheme, County Workers Pension Fund and Unclaimed Financial Assets Authority, had a combined stake of 38.35 percent.
Others are pension funds in parastatals such as Kenya Power, KPC and Kenya Ports Authority (KPA).
Their combined stake has been cut to less than 15 percent, altering the ownership of KPC, less than eight months since its listing at the Nairobi Securities Exchange (NSE).
‘When presented with the opportunity, he jumped at it, without long stories on due diligence, agreements, etc. A true dollar billionaire mindset,’ said an insider who helped put together the deal.
With the acquisition, Mr Dangote is now the second-largest shareholder of KPC behind the Kenyan government. He may have also earned himself a seat or two on the board of the newly listed firm.
Those who were reportedly eyeing the KPC stake, the source said, included global oil industry heavyweights from the US and Europe with interests across the upstream, midstream and downstream segments of the petroleum business.
Multiple sources close to the deal reckon the transaction advisers had been in talks with these potential investors for the past two months over the acquisition of the stake from parastatals that participated in KPC’s initial public offering (IPO).
But the ‘big boys’ delayed their decision, laying emphasis on due diligence and legal documentation.
The delay gave Mr Dangote an opportunity to snap up the lucrative stake, potentially giving him influence over critical petroleum infrastructure that could be used to transport fuel from his planned Lamu refinery.
Mr Dangote said on Wednesday that he planned to invest $1.5bn (Sh195 billion) to expand KPC’s pipeline network in the middle of building a second 700,000-barrel-a-day refinery in Lamu worth Sh2.1 trillion, whose initial work the tycoon said had already started.
This represents an ambitious attempt to build an integrated African refining, storage and distribution business, with Kenya serving as a regional hub for East Africa and Namibia for southern Africa.
Kenya Pipeline’s 1,300km network transports diesel, petrol and jet fuel from the port of Mombasa across Kenya, supplying both the domestic market and neighbouring countries, including Uganda, the Democratic Republic of Congo, South Sudan and Rwanda.
In Namibia, Mr Dangote plans to build fuel storage tanks that would more than triple the capacity of the country’s existing national storage facility.
‘We are going very aggressively with that,’ Mr Dangote said in London, in reference to the planned KPC investment that is part of a continent-wide strategy to distribute refined products around Africa.
From the time the government decided to sell its 65 percent stake in KPC, a portion of the shares had been earmarked for oil marketing companies (OMCs), given that they are the pipeline operator’s main customers.
Although they gave the IPO a wide berth, transaction advisers widened its pool of suitors to include the oil majors post NSE listing, hoping to persuade them to take up the stake that parastatals had been pressured to buy.
But they are said to have taken a long time to accept the offer, allowing Mr Dangote to snap up the stake.
‘They were caught off guard by this (the Dangote) deal,’ added the source.
The Ugandan government is the third-largest shareholder in KPC with a 20 percent stake, while all the pension firms combined have under 15 percent.
With the acquisition of the 24.76 percent stake, Mr Dangote stands to earn an estimated Sh1.44 billion in dividends from KPC, which has proposed a payout of Sh0.32 per share.
The acquisition could also earn him board seats in KPC and the ability to shape strategic investments at the firm.
Uganda, with a smaller stake than Mr Dangote, earned several concessions from Kenya, including two board seats, after the neighbouring country threatened to walk away from buying shares in KPC’s IPO.
It is also a strategic move by Mr Dangote, as he can leverage the existing pipeline to drive the distribution of white fuel across the region.
‘It is easy to extend the pipeline (to other routes) from that strong position as well,’ said the source.
Before committing to the deal, Mr Dangote had reportedly sought concessions, including a restriction on imports of refined petroleum products, as a condition for proceeding with the proposed refinery.
The Nigerian tycoon argued that the plant would not be commercially viable without such safeguards.
It was not immediately clear whether such concessions had been given.
Mr Dangote seems to have developed a nose for a quick buck, noting that he often makes the decision first before it gets to the board.
When President William Ruto floated the idea of building a 700,000-barrel-a-day refinery in Kenya, it did not take him long to shift focus from Tanzania’s Tanga to Kenya’s Lamu.
The choice for Mr Dangote was initially between Tanga and Mombasa, before his team discovered Lamu.
‘I didn’t even know that name (Lamu). By January this year, I had never heard of this name Lamu. I only knew of Lamu when my people came back and said, ‘but there is a place called Lamu,” he said in an interview with the Daily Nation.
KPC
He said that as soon as he heard about the deal, he told his team to continue with it while he prepared to convince the board.
Mr Dangote has offered regional governments a combined 30 percent stake in the Kenyan refinery, which is scheduled to be completed in 2030.
The refinery, whose shares will eventually be listed on the Nairobi bourse, is the largest-ever foreign direct investment for Kenya.
Mr Dangote’s disclosure on KPC comes two days after at least eight parastatals sold their shares, less than eight months after spending billions to buy the stock through the IPO.
The KPC deal comes days after Mr Dangote broke ground on September 30 for the construction of a $16 billion (Sh2 trillion) Kenyan oil refinery in Lamu, aimed at lowering East Africa’s fuel costs and saving the region’s hard currency used to import refined products.
The billionaire wants to replicate his group’s 700,000-barrel-per-day Nigerian refinery as countries including Kenya and Uganda look to start producing crude oil.
About 13 parastatals splashed Sh64.23 billion on the Kenya Pipeline IPO, earning a 38.35 percent stake in the firm.
The NSSF has an estimated 23.3 percent stake in KPC, Public Servants Pension Scheme (7.94 percent), County Workers Pension Fund (2.2 percent) and Unclaimed Financial Assets Authority (1.98 percent).
The IPO had to raise at least Sh53.1 billion from more than 250 investors for it to proceed, a target that had not been achieved as the offer raced to a close.
This forced the State to urge parastatals, the State-backed pension scheme and the Ugandan government to save the IPO from collapse.
At Sh9.02, the State-owned firms sold the shares at nearly the same price as KPC’s IPO offer price on the Nairobi bourse.