The two investment banks placed a five cent bid for advisory role in KenGen's rights issue.
Dyer & Blair Investment Bank and Faida Investments will jointly earn five cents as the lead sponsoring stockbrokers for KenGen’s Sh28.8 billion rights issue.
The two investment banks will not enjoy a piece of the Sh342 million that KenGen will pay to lawyers, public relations and transaction fees in the fundraising plan.
Offers to help the government and companies listing on the Nairobi Securities Exchange (NSE) in 2007 and 2008 were characterised by rock-bottom bids ranging between zero and five cents in 2007.
The practice was more evident among sponsoring stockbrokers during tenders for privatisation of State-owned firms, including KenGen, Kenya Re and Safaricom IPO.
This has marked a return with KenGen right issue, highlighting the vicious fights for control for advisory services in fundraising plans like IPOs and right issues.
Analysts reckon that firms placing near-zero bids benefit from publicity that accompanies flotations, putting them in favourable positions to secure future business locally and abroad.
KenGen’s cash call, which opened Monday, will sell 4.4 billion new shares at Sh6.55 to its shareholders in the ratio of two for each share held.
The offer will generate Sh129.5 million in share placement commissions, excluding the government’s rights because the State will be converting its loans of Sh20.1 billion equity in the power generator. The government owns 70 per cent of KenGen.
Investors willing to participate in the rights issue but are not shareholders can buy rights of owners who are not willing to exercise their option.
Non-shareholders also have an option of buying the shares that will not be taken up at the end of the rights issue period through what is known as a rump.
Those offering near zero bids expect to make their money by selling a sizeable fraction of the shares, giving them piece of the Sh129.5 million placement fee.
Going by past IPOs, the lead brokers tend to process a substantial bit of the shares on offer.
Dyer & Blair owned by Jimnah Mbaru placed a five cent bid for advisory role in Safaricom’s IPO in 2007. It earned a good share of the Sh750 million the Safaricom offer generated in placement fees.
Brokers earn commissions of between one per cent and 1.5 per cent.
The rights issue will open for three weeks to close on June 10. Listing and commencement of trading of new shares at the NSE will be on July 6.
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