Transcript Dyer & Blair - Prescon-int

Presentation Outline
1)
Introduction
2)
The Case for Capital Markets – Captive Investor Base
3)
Financing Options and Process
1)
Equity Options
2)
Debt Options
3)
Alternative Options
4)
Why Dyer & Blair
5)
Conclusion
Introduction
 This presentation will take you through a variety of
financing options available via the Capital Markets and
 We will also make a case for why the Capital Markets
would be an attractive option for Cement Companies
Cement Production and Demand Drivers
East African
Cement
Production
■ East Africa produced 8.4 million tonnes of cement in 2012
■ Kenya produced 4.6 million tonnes
■ Tanzania produced 2.5 million tonnes
■ Uganda produced 1.7 million tonnes
East African
Cement
Consumption
■ East Africa consumed 8.5 million tonnes of cement in 2012
■ The average consumption per capita was 66.8 kg
■ With countries in the region expected to average GDP growth rates above 4% in 2013,
consumption is expected to increase
Infrastructure
Projects
Construction
Sector/Real Estate
Development
■ Cement Consumption will be driven in part by the huge infrastructure projects the
Government of Kenya and neighbouring countries have planned. These include
■ Lapsset and Konza City Projects
■ Dual Carriage Highways
■ Power Plants
■ Bridges
■ Ports
■ Construction sector grew by 13.%, accounting for 4% of Kenya’s GDP
■ Kenya faces an annual housing shortage of approximately 400,000 units
■ Commercial retail segment is also experiencing significant growth with the development of
Garden City and Two Rivers
NSE Performance 2013 YTD
NSE 20 Index
16.7% CAGR YTD
ARM Cement
59.6% CAGR YTD
Bamburi Cement
17.3% CAGR YTD
EAPCC
42.3% CAGR YTD
Cement Company Performance 2013 YTD
250.00
200.00
150.00
100.00
50.00
0.00
31-Dec-12
31-Jan-13
28-Feb-13
31-Mar-13
ARM
30-Apr-13
Bamburi
31-May-13
EAPCC
30-Jun-13
31-Jul-13
The Case for Capital Markets – Captive
Investor Base
Retirement Benefits Industry in Kenya
 As at December 2012, total Kenyan retirement benefits industry assets stood at Ksh
548.8 billion
 Ksh 436.7 billion held by Fund Managers, Ksh 82.1 billion held by NSSF and Ksh
30 billion in property investments held by schemes not under control of fund
managers
December 2012
Source: RBA
Industry Update
Dec 2012
Statutory Maximum
Ksh Billion
%
%
Government Securities
190.3
35%
90%
Quoted Equities
130.4
24%
70%
Immovable Property
101.6
19%
30%
Guaranteed Funds
48.1
9%
100%
Fixed Income
26.7
5%
30%
Fixed Deposit
27.1
5%
30%
Offshore
8.5
2%
15%
Cash
12.9
2%
5%
Unquoted
3.1
1%
5%
Other
0
0%
10%
Total
548.8
100%
Key Investment Considerations for
Pension Funds
Shortage of
Investment
Products
Preference for
listed Investments
Fixed Income
Products
■ Fund Managers are currently limited to investing in Government Securities and Quoted
Equities
■ Universe of quoted equities is small due to lack of liquidity in certain stocks
■ Fund Managers have repeatedly expressed their desire for more investment products
especially in the fixed income and equities space in which they can deploy large sums
■ Due to RBA regulations, fund managers have a preference for listed investments
■ Thus, listing on the NSE is a key criteria for accessing this vast investor base
■ Appetite for private placements is dependent on issuer profile and likelihood of listing in the
next 18 months
■ Private placements are often less liquid hence price discovery on OTC is limited
■ Fund Managers of Pension funds are the main buyers of corporate debt on the NSE, often
making up to 90% of the book
■ Certain bonds can attract infrastructure status if the proceeds will be used in the development
of infrastructure
■ Very attractive to investors due to the tax benefits
Financing Options and Process
Financing Options via the Capital
Markets
 This section will include
 Equity Options
 Initial Public Offering/Rights Issue Process
 Trade Sale (non public offer)
 Debt Options
 Corporate Bond/Infrastructure Bond or Medium
Term Note Programme
 Alternative Financing Options
Financing Options – Overview of Initial
Public Offering or Rights Issue Process
Actions by Client
Offer Preparation
Placement & Closure
■ Client Board approval
■ Due diligence- legal, financial
■ PR and Roadshows
■ No Objection from Relevant
Industry Regulator
■ Equity valuation & rights
computation
■ Launch & Offer Opening Period
■ AGM for Shareholders’
Approval (for Increase in
Authorised shares (if
necessary), IPO & Rights
Issue)
■ Prepare Offer Documents
■ Closure of offer & Receipt of
funds
■ Information Memorandum (IM)
■ Processing & allotment
■ Provisional Allotment Letters
(PALs)
■ Announcement of result &
refunds
■ CMA & NSE Approvals of offer
documents
■ Listing on NSE
Pre IPO Process can take
up to 4 months
depending on the issuer
4 weeks
■ Printing & distribution of IM &
PALs
12 weeks
Six months cumulative
8 weeks
Financing Options – Overview of the
Trade Sale Process
Offer Preparation
■ Equity valuation and
price approval by
Client Board
Tender Stage
■ Send out EOI/TeaserContact all possible
interested investors
■ Prepare bidding and
■ Shortlist to send RFP
transaction documents ■ Sign NDA , print and
– Prepare RFP
distribute SM & other
requested information
– Sales
Memorandum (SM) ■ Set up a dataroom
Selection Stage
■ Pre-qualified bidders
to submit initial
indicative offer
■ Bid Evaluation
■ Pick top 3 bidders to
submit revised best
offer
Offer Closure
■ Negotiate and award
preferred bidder
■ Sign share purchase
agreement
■ Receipt of funds
■ Pick preferred bidder
– EOI Teaser
■ Allow 4 weeks from
SM date for due
■ AGM for Shareholders’
diligence
Approval
■ Bidders conference
■ CMA & NSE
Approvals of offer
documents (if
necessary)
4 weeks
8 weeks
6weeks
Six months cumulative
8 weeks
Financing Options – Corporate/Infrastructure Bond or
Medium Term Note Programme
Actions by Client
Offer Preparation
Placement & Closure
■ Client Board approval
■ Due diligence- legal, financial
■ PR and Roadshows
■ No Objection from Relevant
Industry Regulator
■ Prepare Offer Documents
■ Launch & Offer Opening Period
■ Information Memorandum (IM)
■ Closure of offer & Receipt of
funds
■ National Treasury approval for
Infrastructure Status
■ Kenya Revenue Authority
approval for Infrastructure
Status and Tax Exemptions
■ CMA & NSE Approvals of offer
documents
■ Printing & distribution of IM
■ Processing & allotment
■ Announcement of result &
Settlement
■ Listing on NSE
4 weeks
9 weeks
Four to Five months cumulative
6 weeks
Financing Options – Key Considerations
Rights issue
Initial Public Offering/Secondary
Issuance
Trade sale/new investors
Corporate Bond
Offer of new shares to current
shareholders, discounted to the
prevailing market price
Offer of new shares to new and existing
shareholders, locally and offshore
A non-public offer to sell a significant
proportion of shares to private
investors
Offer of debt securities to fixed income
investors
Pros
Pros
Pros
Pros
■
Quick access to capital from
existing shareholders
■
No dilution of shareholders if they
take up their rights
■
Can be underwritten to ensure full
subscription
■
Can be used to bring in new
shareholders through renounced
rights e.g. KCB/Family Bank/KPLC
■
Improved market capacity – affords
the Issuer the ability to attract
investment from a wider pool of
investors globally
■
Potential to attract a premium given ■
the ability to offer a sizeable stake
and, potentially, board
representation
■
Typically prices at a tighter
discount to market than a rights
issue
■
Issuer will deal with fewer investors
■
■
Investors can bring strategic
expertise through board
representation, if desired
Issuer receives all the proceeds
upfront
■
A bond programme can be
designed such that Issuers can tap
into the debt capitals when they
need to
■
Creates stronger platform for future
capital raising exercises
■
Faster transaction process as
investors will have to work within
the tender timelines
■
Can generate large capital injection
from single or consortium of
investors (e.g. Helios Equity Deal)
Large local investor base keen to
invest in corporate bonds as they
offer a higher coupon than
government securities
Cons
Cons
Cons
Cons
■
■
Dilution of existing shareholding
■
Dilution of existing shareholding
■
■
Depending on market conditions,
there may not be appetite for the
issue
■
Investors may want to exit after a
number of years- Issuer would
need to plan ahead
Depending on market conditions,
shareholders may not to take up
their rights – Market timing
■
May depress current market price
due to increased shares supply
■
Amount raised and timing has to be
based on key shareholders’ ability
to take up their rights
Depending on market conditions,
pricing may be unattractive due to
high prevailing interest rates
Financing Options – Alternative Options
■
Private Placements
Convertible Bonds
■
■
■
■
■
■
Quasi debt product with an option to convert principal into an equity stake
Lower coupon due to equity kicker
Easier to price if company is listed
Examples include AFC’s 2012 USD50m investment in ARM Cement (unlisted) and Transcentury’s
2011 USD75m issued listed in Mauritius
■
Mezzanine Finance sits below senior debt and can be used to fund acquisition, founder shareholders’
participation in rights issue or for key shareholders to buy out other key shareholders who are looking
to exit
More expensive than senior debt but various structures can offer flexibility including deferred interest
payments and so on
Mezzanine Finance
■
■
Regional Bonds
Preference Shares
While process flows have been for public issues, there is appetite in the market for private
placements for equity and debt
For equity, investors prefer to invest with a fixed timeline to listing on NSE
For debt, investors prefers an investment grade corporate with a good brand and in a well understood
sector
■
■
■
■
For corporates with regional operations, there are regulations yet to be gazetted that set up the
framework for regional bond issuance
Under one programme coordinated by the various Capital Market Authorities in East Africa, a
corporate can issue bonds in the local currencies at reduced costs
Separate class of equity securities that will not dilute current shareholders
Flexible structure as can have a fixed or open-ended maturity, can be issued without voting rights etc
As holders will have priority over ordinary shareholders with respect to dividend payments,
shareholder sentiment would need to be considered with this option
Why Dyer & Blair Investment Bank
Introduction
Dyer and Blair is a leading regional investment bank that offers a
diversified range of financial services to a client base that includes
governments, corporations, financial institutions, institutional/retail
investors and high net worth individuals
Dyer & Blair has grown into the
largest Investment Bank in the
region with a capital base of over
KShs 1 billion
Founder member of the NSE (1954)
Subsidiaries in Uganda and Rwanda
Licensed member of the Capital
Markets Authority
Investment
Banking
Brokerage
(Equities and
Fixed Income)
Asset
Management
Awards - A History of Excellence
Best Investment Bank in 2012, 2011 and 2008
Capital Market Awards
Best Brokerage House in 2012
Capital Market Awards
Best Transaction Advisor in 2011 and 2008
Capital Market Awards
EMEA IPO of the
Year (Safaricom)
International
Financial Review
Awards (2008)
Best Brokerage House
(Kenya)
EMEA Finance (2008)
Superbrands Status
Only Investment
Bank in East Africa
to be awarded
(2007)
Best Securities House
– Kenya
Euromoney Awards for
Excellence (2000)
Dyer and Blair’s Current Bonds &
Equities Market Shares
NSE Cumulative Bonds Performance
D&B the
only
player in
Top 3
Brokers
on both
Equities
& Bonds
Top 3 Brokers
Market Share
FY Dec 2012
36.51%
17.42%
Dyer & Blair Investment Bank
Broker B
Broker C
13.5%
Others (12 brokers)
32.92%
Total Cumulative Volume traded on NSE by
all participants (KShs Billion)
1,143.67
NSE Cumulative Equities Performance for FY 2012
Top 3 Brokers in Equities
Broker X
Broker Y
Dyer and Blair Investment Bank
Others (12 brokers)
Total Cumulative Volume traded on
NSE by all participants (Ksh Billion)
Market Share
14.58%
14.50%
12.19%
58.73%
173.58
Leading Investment Bank in East &
Central Africa
(formerly City Trust Limited)
Lead Transaction Advisor
L
Acquisition of I&M Bank
through a share swap
USD 452 million
2013
Lead Sponsoring Broker &
Placement Agent
Lead Transaction Advisor
& Sponsoring Broker
Sponsoring Broker
2nd Tranche Corporate
Bond USD 5.7 million
2012
L
L
Rights Issue
USD34 million
2012
Initial Public Offering
USD63 million
2011
Introduction by Listing
USD260 million
2011
Transaction Advisor
L
Lead Transaction Advisor
& Sponsoring Broker
L
Sponsoring Broker &
Placement Agent
Lead Transaction Advisor
& Sponsoring Broker
Sponsoring Broker &
Placement Agent
Lead Sponsoring Broker
L
L
L
Corporate Bond
USD28 million
2011
Capital Base Restructuring
USD317.5 million
2010
Corporate Bond
(Uganda)
USD20 million
2010
Initial Public Offering
USD30 million
2010
Acquisition of Chevron’s
Assets in Africa
USD47 million
2009
Lead Transaction Advisor
Sponsoring Broker &
Placement Agent
Lead Transaction Advisor
& Sponsoring Broker
Sponsoring Broker &
Placement Agent
Lead Transaction Advisor
& Sponsoring Broker
Corporate Bond
(Uganda)
USD15 million
2009
Initial Public Offering
USD75 million
2008
Corporate Bond
USD25.6 million
2008
Rights Issue
USD16.5 million
2008
L
L
Rights Issue & Initial
Public Offering
USD31.35 million
2009
L
L
L
L
L
Leading Investment Bank in East &
Central Africa
Lead Transaction Advisor
with Morgan Stanley
Sole Arranger &
Bookrunner
Lead Transaction Advisor
& Underwriter
Lead Transaction Advisor
L
L
Initial Public Offering
USD800 million
2008
Corporate Bond
USD9 million
2007
Rights Issue
USD5 million
2007
Acquisition of Equity
Bank 24.99%
USD172 million
2007
Initial Public Offering
USD32.6 million
2007
Lead Sponsoring Broker
Sponsoring Broker &
Placement Agent
Transaction Advisor
Lead Transaction Advisor
Lead Transaction Advisor
L
L
L
Initial Public Offering
USD12 million
2007
Initial Public Offering
(Uganda)
USD40 million
2006
Second Public
Offering
USD65 million
2006
Corporate
Restructuring
2006
Assets Divestiture
USD25 million
2006
Lead Transaction Advisor
Lead Sponsoring Broker
L
L
L
L
L
L
Listing by Introduction
USD50 million
2006
Initial Public Offering
USD110 million
2006
Lead Transaction Advisor
& Sponsoring Broker
L
Initial Public Offering
USD9.5 million
2006
Lead Transaction Advisor
& Sponsoring Broker
L
Conclusion
Conclusion
 We believe that the Capital Markets can provide cement
companies with a viable option for raising capital and
access to a large investor base both locally and
internationally
Contact
Corporate Finance Team
[email protected]
Cynthia Mbaru
Corporate Finance
[email protected]
+254 (0)20 3240137
Q&A