Dangote Industries Limited (DIL), the majority core investor in Dangote Cement Plc, plans to sell shares valued at more than N200 billion in a partial divestment that will widen the float for Dangote Cement.
DIL is owned by Alhaji Aliko Dangote, with over 90% majority equity in Dangote Cement, Nigeria’s most capitalised company.
A document obtained by The Nation showed that Dangote Cement has secured regulatory approval for block divestment of 852.03 million ordinary shares of 50 kobo each. Dangote Cement opened yesterday at N235 per share at the Nigerian Stock Exchange (NSE). The block divestment represents 5.0% of the issued share capital of Dangote Cement.
Dangote Cement’s issued share capital consists of 17.041 billion ordinary shares, which were valued at N4.004 trillion at the opening of the stock market yesterday. Dangote Cement accounts for more than 30% of the total market capitalisation of quoted equities.
A source said the DIL plans to undertake the block sale in tranches and the recent sale of 416 million ordinary shares was the first tranche of the N200 billion divestment. About 2.44% equity stake in Dangote Cement was swapped under pre-arranged transactions earlier this month. A report on the transactions indicated that six deals were struck for the transfer of 416 million ordinary shares of 50 kobo each at a below-the-market price of N210.
While the details of the new major investor are still unknown, Meristem Stockbrokers Ltd sold the shares to Stanbic IBTC Stockbrokers Ltd, both stockbroking firms obviously acting on behalf of third party investors.
The South African government had in June 2013 bought into Dangote Cement through its wholly owned investment company, Public Investment Corporation of South Africa (PIC), which acquired 1.5% equity stake in the Nigerian cement group to emerge the second largest equity investor.
A reliable source said the block divestment might not be unconnected with a regulatory requirement to free more shares of the cement company for ownership and trading by minority investors.
All companies listed on the NSE are required to have a certain minimum percentage of their shares in the hand of the general investing public, otherwise known as free float or public float.
Stock markets maintain a minimum public float to prevent undue concentration of securities in the hands of the core investors and related interests, a situation that can make the stock susceptible to price manipulation.
Companies listed on the Exchange are required to maintain a minimum free float for the set standards under which they are listed to ensure that there is an orderly and liquid market in their securities. The free float requirement for companies on the premium and main boards is 20% while companies on the third-tier board are required to have 15% free float.
Dangote Cement is listed on the premium board of the Exchange. Meanwhile, the NSE allows a minimum free float valued at N40 billion for large-cap companies on the premium board.
Failure by any company under free float deficiency to restructure its share capital at the expiration of the deadline usually issued by the Exchange or secure extension of the deadline may lead to delisting of its shares from the NSE.