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Nigerian billionaire Aliko Dangote came close to abandoning his purchase of almost a quarter of Kenya Pipeline Co. after state pension funds tried to sell him the shares at a premium to their market price, people involved in the negotiations said.
Fund managers acting for the National Social Security Fund and other state-backed pension schemes asked for 9.50 shillings a share, about 5.3% above where the stock was trading on the Nairobi Securities Exchange at the time. Dangote refused to pay the premium and threatened to walk away, the people said. The gap between the two sides came to 46 Kenyan cents a share.
On a block of about 4.5 billion shares, that difference was worth roughly 2.1 billion shillings ($16 million). The sellers failed to get that price, and the deal went through. The final price per share has not been disclosed.
Dangote's group bought the 24.76% stake from at least eight state institutions, including the National Social Security Fund and the Unclaimed Financial Assets Authority, in a transaction valued at about 42.5 billion shillings ($327 million). The shares changed hands on the Nairobi bourse on Oct. 19, with KCB Capital acting for the buyer and Rock Investment Bank for the sellers. Dangote confirmed the purchase two days later at a business event in London.
"We bought 25% of their pipeline network for the distribution of petroleum products," he said.
A quick rally
Kenya Pipeline shares closed at 9.06 shillings before the deal became public, just above the 9-shilling price at which the company listed in March. The government sold 65% of the pipeline operator in the offer, with 13 state-backed pension schemes and agencies taking 38.35% for 64.23 billion shillings and Uganda National Oil Co. buying 20.15%.
The stock has climbed since Dangote's purchase became public. It rose about 8% to 9.78 shillings on Oct. 22 and reached a record 10.75 shillings by the end of the week, an increase of more than 18% in two trading days. At that price, Dangote's stake is worth about 48.4 billion shillings ($373 million).
The deal has drawn criticism at home. Opposition lawmaker Ndindi Nyoro has questioned why pension funds that were directed to buy into the offer in March sold part of their holdings to a private investor less than eight months later, and has called for full disclosure of the buyer and sellers.
President William Ruto defended the sale on Sunday, telling critics he would not allow the shares to be sold cheaply. "I may be the President, but I know what I am doing," he said at a church service in Mwingi.
Dangote's East Africa push
After the sale, the Kenyan government holds about 35% of Kenya Pipeline, the National Social Security Fund about 22% and Uganda National Oil 20.15%, leaving Dangote's group as one of the company's largest shareholders.
The pipeline operator runs the network that carries fuel from the port of Mombasa to Nairobi and western Kenya, which also supplies Uganda and other inland markets. The stake gives Dangote, whose $20 billion refinery near Lagos is in the middle of a share sale that closes on Oct. 27, a foothold in the infrastructure that moves petroleum products across East Africa.
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