Dangote Petroleum Refinery has secured fresh institutional backing as it moves closer to a planned public listing that could raise up to $5 billion.
The Refinery secured a $1 billion underwriting programme as preparations intensify for its planned initial public offering in Nigeria.
But only part of that amount is tied directly to the IPO.
Of the $1 billion programme, $600 million relates to the refinery’s completed private placement, while another $400 million has been committed to support the planned public offer.
The arrangement was structured through Pan-African Refinery Investment, a special-purpose vehicle and subsidiary of Lilium Capital, one of the refinery’s financial advisers.
The $400 million commitment provides an important financial backstop ahead of what could become one of Africa’s largest public offerings.
What the $400 million means
An underwriting commitment reduces some of the uncertainty around an IPO.
Underwriters typically agree to take up a portion of shares if demand from other investors falls short of expectations. That gives the issuing company greater confidence that it can raise the targeted capital.
In Dangote Refinery’s case, the $400 million commitment is expected to take effect when the IPO launches, subject to regulatory approval and market conditions.
It does not mean that $400 million has already been invested through the public offer.
The IPO has not yet opened.
Instead, the commitment shows that a portion of the planned offer already has institutional backing before shares are formally offered to investors.
A $5bn listing plan
Dangote Refinery has submitted an application for an IPO of up to $5 billion to Nigeria’s Securities and Exchange Commission.
The final size of the offer has not yet been determined.
The company is targeting a Nigerian listing around October.
If the transaction reaches the proposed scale, it could become one of the largest IPOs ever undertaken in Africa.
The refinery has already attracted substantial private capital.
A $2.5 billion private placement completed in July valued the business at about $40 billion and was reportedly 3.7 times oversubscribed.
Africa Finance Corporation was among the investors.
Business Elites Africa previously examined what Dangote Refinery’s $40 billion valuation could mean for investors ahead of the proposed listing.
Dangote Refinery is one of Africa’s largest private industrial projects.
The Lagos-based facility cost about $20 billion to develop and has become a major supplier of refined petroleum products to Nigeria and international markets.
The company also plans to expand refining capacity to about 1.4 million barrels per day.
Capital raised from the IPO is expected to support that expansion.
A public listing would also change the refinery’s funding structure.
Until now, the business has relied largely on Dangote Group capital, debt financing and private investors.
An IPO would open the company to a much wider pool of institutional and retail investors.
Dangote Refinery CEO David Bird has described the proposed listing as a “people’s IPO,” reflecting the company’s plan to attract significant participation from Nigerian investors.
A foreign listing is not expected immediately.