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Dangote Flour IPO Oversubscribed by 520 percentDangote Flour IPO Oversubscribed by 520 percent
Emmanuel Onyeche
6th Jan. 2008
The Dangote Flour Initial Public Offer, which closed on October 8 last year, was oversubscribed by 520 percent, the management of the bluechip firm has confirmed. Consequently, investors whose request for shares in the company could not be totally accommodated would have the balance of their offer money returned with interest.
The Media Relations Manager of Dangote Group, Mr Joseph Okonmah, who disclosed this to Sunday Punch, said the rate at which the Group borrowed money from the banks as well as the final approval of the Securities And Exchange Commission would determine the interest to be paid on returned money. "We are returning money with interest at a rate between five and seven percent, and this depends on the rate we took money from the banks. Of course, all these things must get the approval of SEC," he told our correspondent on Friday.
On the percentage of the excess funds from the oversubscription that the company is prepared to absorb as well as the pattern of allotment to successful subscribers, Okonmah said all that would also depend on the approval of SEC. "We are not taking any position until SEC approves the allotment pattern, but I can assure all successful subscribers to the offer that Dangote will apply the principles of fairness and equity in all it does concerning the offer," he said. According to him, the company is expecting the approval of SEC next week, and it is thereafter that people will start receiving their allotment offers.
Between September 6 and October 8, Dangote flour, preparatory to its listing on the NSE, offered 1.2 billion shares to the public at N15 per share to raise N18.75bn. In the offer prospectus, it was stated that 60 percent of the offer would be preferentially allotted to identified investors. This was reduced to 20 percent by the company, which stated that investors demand had, within the first week of the offer, overwhelmed initial projections. This increased the share on offer to the public to 1 billion ordinary shares out of the total share offering of 1.250bn, while the preferential allotment was reduced to 250 million. The company, which sought to raise N18.75bn may have, by the oversubscription, pooled about N116.25bn. Due to regulatory requirements, it cannot absorb all the excess funds and may have to refund as much as N48.75bn if it absorbs 50 percent of the excess funds.
A subsidiary of the Dangote Group, Dangote Sugar Refinery, had made history in 2006 as the only company to have paid interest on returned money following an oversubscription. Then, it offered 3 billion ordinary shares of 50 kobo each at N18 per share in what was described as the largest Initial Public Offering in the history of Nigeria as it sought to raise N54bn. It was oversubscribed by over 300 percent and the company returned money to its subscribers at the rate of 10 percent, an action that earned it commendation from the Nigerian Stock Exchange.
Besides the Dangotes, other companies that have returned money to subscribers as a result of Oversubscriptions, though with no interest attached, include May and Baker, in 2006, when it raised N1.5 billion by way of offer of subscription of 375 million ordinary shares of 50 kobo each at N4 per share. A reoccurring decimal which worries investors in the Nigerian Capital market is the issue of oversubscriptions and the returning of unabsorbed excess funds. Investors also worry about the delay in the release of share certificates by issuers, some of whom use them as a ploy to tie down people's money.
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