In apparent show of confidence, some foreign investors have bought 2.3 per cent stake in Dangote Cement Plc for N86.1 billion ($236 million). The sale involved 416 million shares that was consummated in six off market deals on the Nigerian Stock Exchange (NSE) on Tuesday.
This is the third time foreign investors are buying into Dangote Cement, where Africa’s richest man, Aliko Dangote, has a controlling stake.
In 2013, South Africa’s Public Investment Corporation (PIC) bought 1.5 per cent for $289.3 million. Similarly, in 2014, Sovereign fund Investment Corp of Dubai (ICD) acquired 1.4 per cent for $300 million.
Although the identity of the new foreign investors who bought 2.3 per cent yesterday could not be ascertained, the news lifted the price of the stock by 7.26 per cent or N16.25 from N223.75 to N240 per share to record highest price gain in absolute terms.
Reacting to the transaction, a leading stockbroker, Mr. David Adonri, said it is good development for both the company and the Nigerian economy.
“As you are aware, Dangote Cement is a multinational entity. It is capable of eliciting global interest. New foreign investment can be viewed from the perspective that the company is performing very well and that the Nigerian economy is providing it with necessary enabling environment,” he said.
Dangote Cement is the largest company on the NSE, accounting for a third of the bourse’s total market capitalisation. The company closed with market capitalisation of N4.089 trillion yesterday.
Dangote Cement recently reported a 24 per cent growth and profit before tax for the half year ended June 30, 2017 to N155.58 billion.
The company had recorded a profit after tax of N187 billion in 2016 and paid a dividend of N8.50 per share. Dangote told shareholders that the company’s Pan-African diversification has provided cash streams from countries such as Senegal, Cameroon and Zambia, which have provided them with essential foreign currency as foreign exchange controls made it difficult for them to obtain dollars for operations.
“Furthermore, we were able to borrow money in these countries’ local currencies, thus reducing our exposure to foreign currency shortages in Nigeria. In addition, we began to generate foreign currency sales from exports of cement from Nigeria to Ghana,” Dangote said.
He noted that the results of strategic decisions taken years ago enabled Dangote Cement to strengthen its business and consolidate its position in 2016 when many others in Nigeria and across the rest of Africa have struggled against economic downturn.
Update: Dangote Cement sells 2.3 pct stake to foreign investors for $236 Million
* Dangote Cement working to boost minimum share float – source
* The cement maker plans to double size of African plant by 2020 (Adds closing share price, stock index)
LAGOS, Aug 1 (Reuters) – Nigeria’s Dangote Industries Limited sold a 2.3 percent stake in Dangote Cement to foreign investors on Tuesday in a stock market deal valued at 86.1 billion naira ($236 million).
Africa’s biggest cement maker has been selling small stakes to increase its free float, which is well below the Nigerian stock exchange’s required level.
A spokesman for the Nigerian Stock Exchange said 416 million shares of Dangote Cement were sold on Tuesday at 210 naira each in six off-market deals negotiated between Stanbic IBTC and Meristem stockbrokers.
The price was below Dangote Cement’s closing price on Monday of 223.75 naira. Shares in the company, owned by Africa’s richest man Aliko Dangote, jumped after news of the share sale, closing up 7.3 percent at 240 naira, valuing the company at 4.09 trillion naira ($11.2 billion).
A spokesman for the cement maker said the deal was between Dangote Industries Limited and some foreign investors, whom he did not identify.
The transaction increases Dangote Cement’s free float to 10.4 percent according to Thomson Reuters calculations, still well below a stock market requirement of 20 percent.
It is the biggest company on the Nigerian Stock Exchange, accounting for a third of the bourse’s total market capitalisation, and when it listed in 2010 the bourse waived its free float requirement because it wanted to encourage more companies to list.
It gave Dangote 18 months to reach the 20 percent level but a banking source said the company has still yet to meet its minimum float requirement as local investors dislike its high valuation and foreign investors have been deterred by a currency crisis in Nigeria.
In 2013, Dangote Industries sold 1.5 percent of its 95 percent stake in Dangote Cement to South Africa’s Public Investment Corporation (PIC) for $289.3 million.
Subsequently it sold a 1.4 percent stake to Sovereign fund Investment Corp of Dubai (ICD) for $300 million in 2014.
Dangote Cement told Reuters last month that it planned to invest about $4 billion over the next two to three years to nearly double its production capacity to 80 million tonnes in Africa.
However it faces competition in Africa from French cement maker Lafarge which has combined its Nigerian and South African businesses to accelerate growth on the continent, as well as other local rivals.
Last week Dangote Cement reported a 24.6 percent rise in half-year pretax profit to 155.58 billion naira.
($1 = 365.00 naira) (Editing by David Evans and Susan Fenton)