Institutional investors help Kenya's first major IPO in two decades to exceed target

By Duncan Miriri and George Obulutsa

NAIROBI, March 4 (Reuters) - Demand from Kenyan and regional investors helped Kenya Pipeline Company's initial public offering become oversubscribed, the finance minister said on Wednesday, as the state‑owned firm raised the 106.3 billion shillings ($823.7 million) the government had targeted in its first major deal in nearly 20 years.

The sale, which got a subscription rate of 105.7%, despite earlier concerns over lower valuations from some banks, an extended offer period and local media reports of investor apathy.

Finance Minister John Mbadi dismissed the "loud whispers about over-valuation of the shares" as he released the results of the offer, saying Kenya Pipeline has a petroleum products movement and storage monopoly in the region and receives payments in dollars, helping protect it from currency volatility. These competitive advantages attracted strong institutional demand, he said.

Uganda, a landlocked neighbour which uses the pipeline to move its petroleum products, secured a 20.15% stake in the company during the IPO. Rwanda also bought shares, Mbadi said.

DEAL TO FUND INFRASTRUCTURE INVESTMENTS

The shares will start trading on the Nairobi bourse on March 9, with proceeds earmarked for the national infrastructure fund to support highways, railways, ports and energy projects.

With limited fiscal space for tax‑ or debt‑driven development, President William Ruto's administration has turned to securitising revenue streams and selling state assets.

The strategy has drawn criticism, including from lawmakers, but Mbadi vowed to press on.

"If there is something to be sold, we need to sell," he said. "We will divest, we will privatise so that we limit the government involvement in business in this country, and at the same time, convert those assets into even more productive assets."

The government, which is retaining a 35% stake in the pipeline company after selling 65% in the IPO, is also reducing its stake in telecoms operator Safaricom SCOM.NR.

The Kenya Pipeline Company IPO is the region's biggest in local currency, surpassing the 2008 Safaricom offering, which raised just over 50 billion shillings.

Market participants welcomed the listing.

"We anticipate investor interest to gain momentum as the company delivers on its strategic initiatives," said Eric Musau, head of research at Standard Investment Bank in Nairobi.

"Although foreign participation was limited during the IPO, we expect an uptick in offshore inflows as the stock gains inclusion in key regional and global indices."

($1 = 128.9000 Kenyan shillings)