Note, this story is for news information purposes only and is not part of any offer, invitation, inducement, recommendation or solicitation to purchase, subscribe for, sell or otherwise dispose of any securities in any jurisdiction. No public offering of shares in Dangote Refinery has been launched.

Backing of $1 billion has already been pledged ahead of the initial public offering (IPO) of shares in Dangote Petroleum Refinery & Petrochemicals FZE, before there has been any official announcement or timetable. The offering could be Africa’s biggest IPO, as we highlighted in our last story after the application was submitted to the Securities and Exchange Commission of Nigeria.

Dangote Refinery has mandated Dubai-based advisory firm Marob Strategies and Consulting DIFC Ltd and Washington-based investment company Lilium Capital Group as co-financial advisers. They announced on 18 August a $1bn programme made up of a fully-funded tranche of $600 million which had been completed into the July private placement, and a further $400m underwriting to support the planned IPO programme and listing on the Nigerian Exchange (NGX) stock market (see the press release reported on Zawya).

Marob Strategies and ⁠Lilium Capital say the underwriting is through a special purpose vehicle company called Pan-African Refinery Investment SPV, a subsidiary of Lilium.

According to a Reuters story, the IPO application could be for as much as $5bn although other sources forecast $2bn (for example this story on Billionaires Africa). The final figure will be set after discussion with regulators and the exchange and after detailed discussion with potential investors.

Investment banks and other investment firms offer underwriting services in IPOs and some other transactions. transactions, acting as intermediaries between the issuer and investors (for more background on underwriting, see Investopaedia). There are various underwriting agreements, including that underwriters guarantee they will buy the shares at a fixed price if they are not subscribed by investors, or they will buy the shares and sell them on to investor. Lilium’s underwriting commitment will be implemented when the IPO starts, “subject to market conditions, corporate and regulatory approvals, the execution of definitive documentation and compliance with applicable securities laws.” (according to the press release).

Marob Strategies and ⁠Lilium Capital are coordinating the onward sale of participation in both the private placement $600m and the underwriting $400m. For the latter they are talking to African and Caribbean sovereign wealth funds, governments, institutional investors and other eligible investors in connection with the underwriting sell-down. The offering is expected to generate significant flows of capital from other African markets. Dangote Refinery could also raise capital through share offers on other leading African capital markets, as we highlighted in our April story.

Aliko Dangote, described as Africa’s richest man, is majority owner of Dangote Refinery, which some analysts value at between $40bn and $50bn, per our story in April. He commented: “This is an important milestone for DPRP and for African capital markets. The successful completion of the private placement, together with the US$400m underwriting commitment.. reflects confidence in the refinery’s strategic role.”

Prof. Benedict Okey Oramah, Chairman of Marob Strategies, said: “The level of interest confirms the appetite for African-led capital markets transactions that provide investors with access to transformative assets on the continent. The success of this transaction paves the way for many more such transactions in the future.”

Simon Tiemtoré, Chairman of Lilium Capital Group, said: “By mobilizing long-term capital for strategic assets such as the Dangote Petroleum Refinery, we are supporting industrialization, strengthening capital markets and contributing to sustainable economic growth across the continent. We are proud to support DPRP on this landmark transaction and look forward to mobilising capital for more transformative projects that create lasting value for Africa.”

The advisers said it is more than just fund-raising, it is intended to deepen African capital markets and show that local institutions can mobilize long-term capital for industrialization, energy security and trade integration under the frameworks created by the African Continental Free Trade Area (AfCFTA).

Photo Courtesy Dangote Refinery website Investor Relations page.