Dangote Refinery IPO opens as Africa’s largest share sale, seeking $1.6 billion

Aliko Dangote rang the opening gong in Lagos on Monday for the public sale of Dangote Petroleum Refinery and Petrochemicals FZE, a deal sized as Africa's largest initial public offering. The group is selling 4.1 billion shares at 525 naira each to raise 2.15 trillion naira, about $1.6 billion at the current rate. The implied value of the 700,000-barrel-a-day plant on the Lekki lagoon is roughly $48 billion to $50 billion. Books stay open until October 13. Listing is pencilled in for late November.

The minimum ticket is 10 shares, or 5,250 naira, a figure aimed at clerks, teachers and the diaspora as well as at pension funds. The offer is structured as Shariah-compliant. The company has talked about dividends in dollars. Digital broker platforms reported outages in the first hours as orders landed. The prospectus allows an over-subscription option already approved by the Securities and Exchange Commission. A private placement in July sold $2.5 billion of stock to institutions including the Africa Finance Corporation.

Bloomberg calculates that a successful listing could add as much as $23 billion to Dangote's fortune and lift him from about $35 billion to as much as $58 billion, past Ken Griffin and Eric Schmidt on that ledger. The man is 69 and has spent more than a decade and about $19 billion to $20 billion putting a single-train refinery on swamp ground east of Lagos. The plant reached full capacity this year. FirstCap, one of the issuing banks, expects refinery revenue near $28 billion this year, more than double the prior year.

The money has a destination. Chief financial officer Bruce Tanner told Semafor that "pretty much all" of the IPO proceeds will fund expansion. Dangote wants to double Nigerian capacity and has talked of a further $14.3 billion of investment. A separate processing plant in Kenya is still on the drawing board. The listed cement and sugar arms already sit on the Nigerian Exchange. Together with the refinery they would form an equity cluster around 83 trillion naira, according to local market arithmetic, and the refinery alone could account for a large share of the exchange's capitalization once it trades.

Nigeria remains a large importer of petrol even with the new plant running. A domestic refinery that sells shares to Nigerian accounts is a political object as well as a financial one. Dangote called the sale "an IPO for the people" in a hall of bankers on Monday. Retail demand will be tested over the next four weeks. If the book fills early, the over-allotment clause matters. If it does not, the $1.6 billion headline shrinks and the expansion timetable slips.

Risks are ordinary and local: naira swings, feedstock supply, regulator fights over pricing, and the gap between nameplate barrels and barrels actually sold. The dollar-dividend promise is a hedge against the first of those. It is also a claim that has to be paid from cash the plant earns in a market where fuel prices are a street issue. Investors buying 10 shares and investors buying blocks will be underwriting that claim.

Africa has not seen a listing of this size. The comparison set is thin. That is why the gong on Monday was treated as an event rather than as a routine bookbuild. Between now and October 13 the only number that matters is how many of the 4.1 billion shares are spoken for, and at what speed the platforms stay up. After November the number that matters is whether the plant's cash covers the story told in the hall.