NSE shops for advisers ahead of listing next year

The Nairobi Securities Exchange (NSE) is shopping for transaction advisers to structure the bourse’s planned listing expected to take place in the first half of next year.

NSE chief executive Peter Mwangi said Thursday that the bourse was looking to sign a team of transaction and legal advisers and lead stockbrokers who will handle the exchange’s self-listing of its shares by introduction.

Shareholders of the bourse, who comprise 22 stockbrokers and investment banks, have already approved the planned listing on the alternative income market segment of the NSE.

“We are in the process of appointing advisers to shepherd the exchange to a self-listing,” said Mr Mwangi.

Listing will see up to 40 per cent of the shares made available for trading to the public.

The process will, however, be preceded by the conversion of NSE’s status to a limited company from a mutually owned organisation through a process called demutualisation.

Mr Mwangi said that NSE was making a formal application for demutualisation to the Capital Markets Authority (CMA).

The stand-off between the Treasury and the 22 shareholders of NSE regarding the ownership structure of the demutualised exchange is, however, an elephant in the room that will require to be resolved.

READ: Treasury rejects brokers’ bid to dilute its stake in NSE

The shareholders want to have a four per cent stake each in the demutualised bourse, and give the government 12 per cent ownership of the exchange.

The Treasury, however, has insisted on getting a 20 per cent stake to be apportioned equally between it and the Investor Compensation Fund (ICF).

The clamour for demutualisation of NSE emerged following the collapse of four stockbrokers which dented the bourse’s image.

Treasury’s presence on the board of the exchange is aimed at boosting investor confidence in capital markets.

The government’s preferred shareholding structure would reduce each broker’s stake to 3.64 per cent, which cuts the money that each would stand to make from future dividends or sale of their shares.

There is no independent valuation on NSE, but the last seat or the equivalent of a share that was sold at the bourse fetched Sh250 million and owners have said that reducing their stakes would mean loss of millions of shillings per member.

The Kenya Association of Stockbrokers and Investment Banks (Kasib), the industry’s lobby group, said that the shareholding issue was being negotiated but a deal should have been reached by the time of listing.

“All stakeholders agree that listing should go on and members believe that this issue will be ironed out soon,” Kasib chief executive Willy Njoroge told the Business Daily.

The shareholder structure hurdle became public after owners of defunct brokerage firms Francis Thuo, and Shah Munge, were added to an original list of 20 brokers who were to get a four per cent stake each.

The brokerage fraternity is proposing that shares to be allocated to the two additional members be hived off the state’s 20 per cent stake, leaving the government with 12 per cent ownership.

The government, through the CMA, has rejected the offer and has asked members to cede part of their four per cent stake for their fellow shareholders.

Mr Mwangi said that it was a matter of time before a compromise is reached since listing cannot be delayed again.

“It is pointless in delaying the process because of one or two differences, we believe that logic we prevail,” said Mr Mwangi.

The introduction of the Growth Enterprise Market Segment, and the Real Estate Investment Trusts, is expected to open new revenue streams for the exchange, which primarily relies on commissions and listing fees for trading in equities and bonds.

NSE made a Sh85.6m net profit in 2011, up from Sh79.2m in 2010.

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