Regulator gives NSE nod to sell shares to public

The Nairobi Securities Exchange (NSE) could list in the coming weeks after it got regulatory approval, signalling possible conclusion of a long-winding and often acrimonious process.

The Capital Markets Authority (CMA), the industry regulator, has approved the NSE demutualisation – or conversion from a firm that is owned by members to a publicly-owned company – and the self-listing of its shares.

“The Board of the Authority approved the Demutualisation of the Nairobi Securities Exchange in line with the Demutualisation Regulations at its board meeting on June 26, 2014,” CMA acting chief executive Paul Muthaura confirmed to the Business Daily on Tuesday.

Last week’s approval by the CMA means that the NSE is on course to be listed within this financial year as earlier planned.

“Further to the CMA approval of our self-listing process, we wish to inform you that the transaction advisors and the NSE management and board of directors are finalising the modalities for the self-listing, which we intend to launch during the month of July 2014. Please brief your members accordingly,” said NSE chief executive Peter Mwangi in a letter to the Kenya Association of Stockbrokers and Investment Banks (Kasib).

The industry lobby said the listing should also give confidence to other companies wishing to list.

“We will have more convincing arguments when we tell other companies to list,” said Kasib chief executive Willie Njoroge.

The NSE is supposed to list the shares in an initial public offering that will see the founder members reduce their shareholding.

The bourse is owned by 22 member firms that control 90 per cent of the shareholding, while the Treasury and the Investor Compensation Fund jointly own the remaining 10 per cent.

The stake held by the 22 shareholders is expected to be reduced by 40 per cent within three years after listing.

Shareholders had earlier agreed to increase the number of shares to 850 million with Sh1 par value each from 25 million at the bourse’s annual general meeting (AGM) held in April.

READ: NSE raises share capital, plans futures exchange ahead of listing

The shares will be consolidated into 215 million shares of Sh4 par value which is meant to avoid the price being too low upon listing. Another 2.5 million shares were reserved for NSE and Kasib employees.

Shareholders had also agreed to set aside Sh500 million for the setting up of a futures exchange. Standard Investment Bank, Renaissance Capital, and Dyer & Blair Investment Bank are transaction advisors on the self-listing.

Demutualisation and self-listing have been dogged by disputes over what share should go to the government, with brokers disputing the State entitlement arising from contribution to development of a market where privatisation issues and Treasury bills and bonds have been crucial.

The move comes at a time market value at the NSE is set to rise as a number of existing firms embark on fund raising. DTB, NIC, National Bank, Uchumi and CIC Insurance are all doing rights issues this year while NIC Bank, Britam and property firm Home Afrika will be seeking to raise funds through the corporate bond market.

READ: Firms plan Sh50bn cash calls on rising business confidence

Outside the listed firms, Mayfox mining had said it plans to list on the NSE’s Growth Enterprise Market Segment (GEMS) while UAP said its listing will happen in 2015.

The Treasury has also suggested listing of the Eurobond on the NSE which would further increase revenues from commissions.

“In addition, the Issuer intends to make an application, after the Notes are delivered against payment, for the Notes to be listed on the Fixed Income Securities Market Segment of the Nairobi Securities Exchange,” says the preliminary prospectus on the Eurobond.

Kenya’s is the largest regional exchange and such a listing would open a huge gap with regional competition.