Business

Written by James Makau

Safaricom HouseThe award of the lead transaction advisor and lead sponsoring broker roles for the Safaricom IPO potentially marks the final falling out of two erstwhile partners.

The petition by the SRK consortium over the award of the lead transaction advisor and lead sponsoring broker roles for the Safaricom IPO potentially marks the final falling out of two erstwhile partners.

Standard Investment Bank petitioned Investment Secretary Esther Koimett last week over the valuation of both technical and financial bids for the IPO that saw the job handed to the Dyer and Blair consortium. The SRK consortium comprises Standard Investment Bank, Renaissance Capital, KPMG, Apex Investment Bank and African Alliance Investment Bank.

Challenge awardSRK’s petition signed by Standard Investment Bank managing director James Wangunyu for a valuation summary is seen as a statement of intent to challenge the award at the Procurement Appeals Board, a development which could derail the time frame for the flotation from the October date set by the government. The Safaricom IPO is set to generate Sh750 million in placement fees and going by past IPOs, the lead broker tends to get a sizeable fraction of the placement fee.

More than the money at stake, however, the petition illustrates just how fickle business partnerships can be with the protagonists now trading various allegations on the integrity front. The contest pits two big players at the Nairobi Stock Exchange where Dyer and Blair chairman Jimnah Mbaru is the overall chairman and Mr Wangunyu is the chairman of the ethics and governance committee.

Their investment banks, together with CFC Financial Services, have bagged recent IPO transactions as joint lead sponsoring brokers forcing the likes of Sterling Securities chairman Stanley Ngaine to cry foul over emergence of cartels in the business. Mr Ngaine’s concerns revolved around bidding zero to provide advisory services, the practice now at the centre of the dispute between the two former business allies.

Under the DSC consortium, the trio teamed up to place the Eveready IPO last December after a successful Partnership in the KenGen IPO, where they bid zero to provide the services, and the ScanGroup IPO in April and July last year, respectively. The zero trick also worked in their favour during the Mumias second offering — a partnership in December last year — leading to allegations of a cartel that was monopolising IPO businesses.

Cracks in the corporate liaison emerged during the bids for the Kenya Re advisory services in February when Standard and CFC accused Dyer and Blair of jumping out of the consortium just two days before the bid proposals were due. In the ensuing contests, Dyer and Blair teamed up with PKF Kenya and QED Actuaries and Consultants of South Africa to win the lead transaction advisor role as its erstwhile partners went on to offer joint lead sponsoring brokers services at no fee.

The trio appeared to be returning together during the AccessKenya Group IPO in April when Dyer and Blair joined Standard Investment Bank and Kestrel Capital as Lead sponsoring Brokers. The precedents of the zero bids that were accepted in previous IPOs put the Treasury on the spot because it cannot turn around now to plead that Standard’s zero bid for the Safaricom job was invalid. Legal experts point out that for a contract to be valid it must have the offer, acceptance by bidding and consideration which is payment.