Billionaire Dangote’s Kenya pipeline stake hits $436 million

Kenya’s President William Ruto called opponents of Nigerian billionaire Aliko Dangote’s purchase of almost a quarter of Kenya Pipeline Co. “extortionists and share racketeers” on Tuesday, as another rally in the company’s shares pushed the value of Dangote’s stake to about $436 million.

Ruto spoke at Ngaaie in Kitui County, eastern Kenya, where he broke ground on a 70 billion-shilling ($540 million) cement and clinker plant being built by Kenyan tycoon Narendra Raval’s Devki Group. He said the Kenya Pipeline shares were listed on the Nairobi Securities Exchange and open to anyone who wanted to buy them.

“Every Kenyan citizen has a right to own any share they want to buy,” Ruto said. “Who told them that it is only they who can own things in this country?”

He pointed to the stock’s gains as evidence that the deal had been good for the state. “In just one week of Dangote investing in the KPC, the share price had gone up by 10 per cent,” he said. Ruto also said the 35% stake the government still holds could one day be worth as much as the whole company was before the sale, and warned that his administration would act against people who try to extort investors. “We will protect investors from extortionists,” he said.

Shares extend rally

Kenya Pipeline shares rose 9.1% to close at 12.55 shillings in Nairobi on Tuesday, after closing at 11.50 shillings on Monday. The stock has risen almost 39% since Oct. 21, the day Dangote confirmed the purchase, when it closed at 9.06 shillings.

Dangote’s group bought about 4.5 billion shares, or 24.76% of the pipeline operator, from state pension funds and agencies for about 42.5 billion shillings ($327 million). The shares changed hands on Oct. 19 at between 9.02 shillings and 9.36 shillings each.

At Tuesday’s closing price, the stake is worth about 56.5 billion shillings ($436 million), roughly 14 billion shillings ($108 million) more than the group paid eight days ago, and about 8 billion shillings ($62 million) more than at the end of last week, when the shares closed at a then-record 10.75 shillings.

Critics question the sale

The deal has become a political fight in Kenya. Ndindi Nyoro, the leader of the opposition People’s Party of Kenya, has questioned why the National Social Security Fund and other state-backed schemes were directed to buy Kenya Pipeline shares in its initial public offering earlier this year, only to sell part of them to a private investor months later. He has asked whether pension savers were properly compensated and called for full disclosure of the buyer and sellers.

Ruto first defended the sale on Sunday at a church service in Mwingi, also in Kitui County, where he said he would not let the shares be sold cheaply to benefit brokers. Dangote was also close to walking away from the purchase when the pension funds asked for a premium to the market price, people involved in the talks said.

At the Kitui event, Ruto said Dangote had been among the investors who tried and failed to build a cement plant in the area, and blamed years of delays on bribe demands and on people seeking free stakes in investors’ projects. Ruto has said before that Dangote abandoned plans for a Kenyan cement factory about seven years ago and invested in Tanzania instead.

Dangote, Africa’s richest person, controls Dangote Industries Ltd., which has interests in cement, sugar, fertilizer and oil refining. Kenya Pipeline runs the network that carries fuel from the port of Mombasa across Kenya and on to Uganda and other inland markets, and the stake gives Dangote a direct role in East Africa’s fuel trade as he plans a 700,000-barrel-a-day refinery at Lamu on Kenya’s northern coast. Ruto said on Tuesday that building the refinery would need more than 2 million tons of cement.