E-Malt.com News article: Tanzania: Tanzanian Breweries IPO will be successful if foreign investors show interest - stockbroker

The success of Tanzanian Breweries initial public offering hinges on foreign investors’ appetite for the shares, The East African cited a stockbroker Tanzanian Securities on November, 6.

East African Breweries Ltd is selling its 20 per cent stake in TBL to raise $71 million. The IPO opened to the public on November, 4 and closes on November, 25.

Tanzanian Securities said the type of buyers targeted for the TBL offer would be critical to its success with the other determinant being the price set for the offer.

“The main risks are the price and the type of buyers involved in the sale as in our view the fewer foreigners the transaction is opened to, the less interest there will be in the stock,” said Tanzania Securities in a report on the stock.

Foreign investors are allowed but only after Tanzanians have had their fill.

Tanzania has in the past locked out foreign investors, including citizens of countries in East Africa, citing a need to maintain foreign exchange controls. But local investor participation at the DSE has lagged behind foreign activity and it is only in the past few months that Tanzanians have taken to investing in the stock market.

The country has also not encouraged its citizens to participate in IPOs held in Kenya, Uganda and Rwanda.

Just a week before the TBL offer kicked off, Precision Air said it extended its share sale by a week to allow the Kenya public to buy into it, highlighting the importance of foreign investors in participation at the DSE.

The airline had said it will allow foreign investors to buy up to 49 per cent of the shares on offer. Precision Air is looking to raise $17 million to expand its fleet with its IPO concluding on the same day the TBL offer kicked off.

With regards to the pricing risk, EABL has set a price of $1.23 per share in the IPO but the TBL shares are trading at $1.21 at the DSE. The slight discount could see investors prefer to buy shares from the market instead of at the IPO.

EABL’s sell of the 20 per cent stake in TBL came after it fell out with SABMiller.

EABL and South Africa’s SABMiller had a partnership in TBL but ended the manufacturing and distribution agreement, with the former opting to buy a 51 per cent majority stake in another Tanzania-based brewer, Serengeti Breweries Ltd.

Serengeti, the second-biggest beer maker in Tanzania after TBL, was previously owned by a group of private investors.

SABMiller and EABL have been in fierce competition for the lucrative Tanzanian beer market where sustained economic and population growth are driving the country’s thirst for alcoholic beverages.

EABL is planning on using the cash from the IPO to buy out SABMiller in their previous partnership with Kenya Breweries Ltd from which the South African firm had a 20 per cent stake. EABL had delayed the IPO, saying there were corrections to be made.

Orbit Securities chief executive Laurean Malauri told The EastAfrican that what led to the delay “was very minor but necessary.”

“These were internal matters that involved preparation of the prospectus, distributing it in good time before the IPO took off.

So once all these and other issues were attended to it was all systems go,” he said.


08 November, 2011