British American IPO headed for full subscription

Stockbrokers expect a last minute rush for the British American Investment Company IPO, which closes on Friday.

The brokers said they did not expect an extension of the application window as the offer had already crossed the minimum 50 per cent subscription benchmark.

“We have crossed the minimum and we will not be extending, but as usual Kenyans wait for the last minute to respond,” said Wilson Irungu, the general manager at NIC Capital , whose investment bank is the lead transaction advisor for the share issue.

British American is seeking to raise Sh5.58 billion from the sale of 650 million shares to the public through the initial public offering (IPO) which opened on July 12.

Mr Irungu said both retail and institutional investors had applied for shares, adding that the investor queues were already forming as the offer neared closure.

Mr Paul Orem, executive director at Dyer and Blair Investment Bank, said the share issue had “definitely crossed the half mark.”

“I see a full subscription but I cannot be specific. I think it has done quite well considering the current economic situation,” said John Kirimi, executive director at Sterling Investment Bank Rising inflation which hit 15 per cent last month has eroded Kenyans’ purchasing power as fuel and food prices increased for eight straight months.

The NSE has also experienced a bear run with share prices plummeting with the erosion of investor purchasing power. British American’s group managing director Benson Wairegi yesterday said the share issue had also attracted international investors.

“We are confident of a full subscription,” said Mr Wairegi.

He said the company was expecting a full uptake on the pool set aside for foreign investors from South Africa and the United Kingdom.
“The rising costs of living has seen a big erosion of investor wealth at the stock exchange as indicated by the fall in the NSE-20 Share Index which has remained below the 4,000 mark for most of the year.

Currently, most shares of companies that came into the bourse by way of initial public offer are now trading below their IPO price.

Eveready’s 63 million shares which debuted at Sh9.50 in August 2006 yesterday closed at Sh2, Access Kenya’s 80 million shares which debuted in March 2007 yesterday closed at Sh6.55 while Safaricom’s 10 billion shares which debuted in June 2008 at Sh5 yesterday closed at Sh3.70.