Africa's richest man acquires 25% of Kenya Pipeline Company for $327 million

Nigerian billionaire Aliko Dangote said his group has bought a quarter of Kenya Pipeline Company Ltd., the state-controlled operator of the network that carries fuel from the port of Mombasa to the rest of the country and on to neighboring states, in a deal worth about 42.5 billion shillings ($327 million).

"We bought 25 per cent of their pipeline network for the distribution of petroleum products," Dangote said on Wednesday at a business conference in London. He did not say which company in his group made the purchase.

The stake matches a block of 4.5 billion Kenya Pipeline shares that changed hands on the Nairobi Securities Exchange on Monday. The shares represent 24.76% of the company's 18.17 billion shares, just under the 25% level at which Kenyan rules require a buyer to make a takeover offer to all shareholders. The block traded at between 9.02 shillings and 9.36 shillings a share, a little above the 9-shilling price at which the company listed in March.

KCB Capital, the investment banking arm of Kenya's largest lender, handled the purchase for its client, and Rock Investment Bank acted for the sellers. The shares came from state institutions that bought into Kenya Pipeline when it went public, including the National Social Security Fund and the Unclaimed Financial Assets Authority.

A contested sale

Kenya sold 65% of Kenya Pipeline in an initial public offering that ran from Jan. 19 to Feb. 19, and the shares began trading on March 9. Private investors took up few of the shares, and 13 state-backed pension schemes and agencies ended up buying 38.35% of the company for 64.23 billion shillings. The National Social Security Fund put in 38.5 billion shillings. Uganda National Oil Co. bought 20.15%.

President William Ruto welcomed this week's sale as "a sign of growing confidence in Kenya's capital markets" and said private investors had bought a 25% stake from public entities.

Opposition lawmaker Ndindi Nyoro has questioned the deal. He said public pension funds had been directed to buy shares in the offering, only for part of those holdings to be sold on to a private investor, and that the sale left them with a loss once transaction costs were counted. Nyoro, who was suspended from Parliament after calling the offering a failure, has called for full disclosure of the buyer and sellers.

After the sale, the Kenyan government holds 35% of Kenya Pipeline, the National Social Security Fund about 22.2% and Uganda National Oil 20.15%. The company's board has recommended a dividend of 0.32 shilling a share, worth about 1.44 billion shillings ($11 million) on the block Dangote has bought.

From refinery to pipeline

The purchase gives Dangote a direct role in moving fuel across East Africa as he builds a refinery in the region. Ruto and Dangote broke ground on Sept. 30 on a refinery in Lamu, on Kenya's northern coast, designed to process 700,000 barrels of crude a day. Kenyan officials value the project at $17 billion, while Dangote has put its cost at $20 billion. His group has offered East African governments a combined 30% stake in the plant, with Kenya's 10% share valued at about $500 million.

Kenya is also negotiating with Dangote on a pipeline to carry crude from the Turkana oil fields in the north to Lamu.

Dangote, Africa's richest person, built his fortune in cement, sugar and flour before moving into fertilizer and refining. His 650,000-barrel-a-day refinery in Lagos, the largest single-train refinery in the world, is in the middle of an initial public offering in Nigeria that closes on Oct. 27.