JPMorgan Chase is having one of its busiest years yet for African companies looking to trade their shares in both London and local equity markets such as the JSE.
The New York-based investment bank had seen interest from at least six companies considering dual listings, said Barry Meyers, the head of JPMorgan’s UK capital markets and sub-Saharan Africa business. The queries come amid a $2.7bn share sale by Vivo Energy in May in London’s largest initial public offering (IPO) this year, with the stock of the pan-African seller of fuels and lubricants also trading in Johannesburg.
“The market wants high-growth, and it’s hard to get that at the moment in the UK and Europe,” spurring increased investor demand for assets in SA and the rest of the continent, Meyers said by phone. “That’s why these emerging-market deals are becoming more prevalent. Dual listings could become a bit of a trend.”
JPMorgan joins Citigroup and Deutsche Bank seeing a bigger pipeline of deals as economies across the region stabilise from a drop in commodity prices and growth picks up. SA has enjoyed a rebound in investor confidence since Cyril Ramaphosa succeeded Jacob Zuma as head of the ruling ANC in December and as president in the middle of February.
There will have to be a bumper haul of deals in the second half if that optimism is to be met. Equity-linked transactions across sub-Saharan Africa total $3.2bn so far in 2018 compared with $6.3bn in the same period in 2017, a record year for deals, according to data compiled by Bloomberg.
Consol Holdings, a South African glass-packing maker, in April pulled its IPO, citing weak demand, while the nation’s economy shrank more than expected in the first quarter.
In March, Helios Towers abandoned plans for an IPO, with Mergermarket reporting that it could merge with another telecommunications tower operator in Africa, Eaton Towers.
JPMorgan has advised on two major deals in 2018 aside from the Vivo transaction: the IPO of Libstar Holdings, a Johannesburg-based food producer that issued stock at the bottom of its price range, and a share sale in which Cape Town-based insurer Sanlam raised almost R6bn.
Dangote Cement, the Nigerian cement producer owned by Africa’s richest man, was considering a share sale in London in the next two years, Bloomberg News reported in April. Bharti Airtel was considering the sale of a quarter of the equity in its African unit by early 2019, people familiar with that transaction told Bloomberg in May.
“There will be more” IPOs like Vivo, Meyers said. Some real-estate companies with pan-African operations had recently come to see JPMorgan regarding potential London listings, he said, declining to be more specific or to identify any of the firms.
Here are some more insights from Meyer:
• On investments in Africa
“Africa looks like a very viable growth alternative to Russia, Turkey and China.
“Investors are very interested in Africa and SA at the moment. There is a lot of international flow coming back into SA. When we did the Sanlam deal in March this year, we saw a lot of international interest, which was not unexpected.”
• On IPOs
“The IPO market is extremely busy this year, busier than any other year. However, investors are now being more selective in what they choose to invest their money in. More than half of the deals have been emerging-market deals.
“It’s an IPO market of winners and losers. Companies need to capture the market’s attention to draw the money.
“For these African-London IPOs to work, you need to be best in class, and it needs to be quite big as well and have a track record.
“Companies shouldn’t be over-leveraged because of perceived geographical risks, but more importantly need to spend their money on growth. Investors want diversification. If you want to get the bigger global investors, being bigger also does help.”