News

Written by Albert Muriuki

The presence of high powered global law firms among the bidders competing for a contract to advise on how to make Safaricom public has opened the possibility of a share flotation in a foreign stock exchange.

Corporate lawyers fighting for the deal and who were interviewed by the Business Daily see a major possibility of dual-listing of Safaricom in Nairobi and either Johannesburg Stock Exchange or London Stock Exchange.

The reasoning behind such a move is mostly to ensure that the Treasury does not leave value on the table by playing the issue as both a major privatisation that will broaden share ownership and income redistribution and as a lucrative emerging market play from sub-Saharan Africa.

With the Government facing a budget deficit of Sh109 billion this year, the Treasury is keen on raising at least Sh34 billion that it has earmarked from the sale of Kenya’s biggest and State-owned mobile phone company. This will make the value that the company will fetch both a sensitive financial and political issue.

A dual-listing strategy, they said, would also help both cushion against a rapid strengthening of the Kenyan shilling that would come with the foreign interest that Safaricom is expected to attract and stabilise the ownership structure to ensure a healthy liquidity and volatility. Among the global law firms that are bidding for Safaricom work include: Clifford Chance, the biggest law firm in the world, Lovells, Stephenson Harwood and Denton Wilde & Septe.

The four law firms will present joint financial and technical proposals with local firms with the exception of Simba and Simba Advocates, the only firm with no local partner. Stephenson Harwood, which boasts cross listing experience in different markets is in a consortium led by Muriu Mungai advocates.

Mr John Syekei, a commercial and intellectual property lawyer with the local firm said the partnership had one significant base should Safaricom seek to become the first indigenous company to be listed in developed markets.

Stephenson Harwood has extensive experience in Africa, having advised the Government of Ghana and Lonrho Plc on the flotation, by way of a global offering, of Ashanti Goldfields Company. It also advised the Ethiopian Privatisation Agency on divesting from the telecoms industry in Ethiopia. It was also involved in the privatisation of Uganda Telecom which was worth $35million (Sh2.3 billion) and acted in various financings for Zambia Consolidated Copper Mines prior to privatization.

With revenues of over $2 billion (Sh130 billion), Clifford Chance LLP is the largest law firm in the world. It has partnered with Kaplan and Stratton and has 27 offices in 20 countries throughout the Americas, Asia, Europe and the Middle East. Clifford Chance boasted 3,857 lawyers including 617 partners and about 3620 non-legal staff on its payroll as of May this year. Mohammed Muigai advocates has teamed up with London based Lovells LLP in a consortium that includes Anjarwalla & Khanna Advocates together with Rachier Amollo Advocates.

Lovells LLP is one of the largest international business legal practices with over 3,000 people operating from over 26 offices in Europe, Asia and the US. Prof Githu Muigai, a senior partner at Mohammed Muigai Advocates, said Lovells brings a broad range of legal expertise which includes Intellectual Property, Real Estate, Construction & Engineering, and Competition and Labour Law.

The British law firm of Denton Wilde Sapte is in a consortium that includes Hamilton, Harrison and Mathew (HH&M) and Oraro and Company advocates and. HH&M has been the lead legal advisor in recent IPO’s including that of Kenya Re and KenGen. Paras Shah, a partner in HH&M, said Denton Wilde Sapte was also their partner in the Kenya Re IPO team, a position which was challenged by Mohammed Muigai Advocates and Muriu Mungai and Company advocates.

The law firms claimed they were unfairly edged out of the Kenya Re legal brief despite having charged the lowest fee for the services at Sh7.86 million ($107, 761) compared to HH&M had charged Sh8.03 million ($110,000). One of the grounds of the complaints was that Denton Wilde Sapte, a foreign firm, did not have a valid practising certificate by virtue of having not been admitted to the roll of advocates of the High Court of Kenya.

The Public Procurement Complaints, Review and Appeals Board however held that local firms could partner with foreign based ones, informing the trend towards foreign partners which was not a bid requirement. “It is a change of tact to make us more competitive since the Appeals board cleared the air on foreign based firms joining forces with local ones,” said Mr Syekei.

The consortium of Simba and Simba however sees matters differently, saying it has adequate local capacity to deliver. “We have the experience and expertise to offer the legal services,” says lawyer John Simba the lead consultant of the consortium, which had also bid for the KenGen job. The battle lodged by the legal consortia last year could replay itself not just because of the sums involved but also because of the prestige associated with being in the professional panel for the flotation of Safaricom, which reported Sh17 billion in profit before tax for the year to March 2007.

Today is the deadline for offers from 75 firms— grouped in consortia to present financial and technical proposals on how the Safaricom IPO should be structured and processed. Other services up for grabs include that of lead transaction advisor, reporting accountant, receiving bank, share registry, advertising and public relations.

A cloud that was looming in the horizon with a parliamentary committee saying flotation should be pushed forward until its ownership is clarified has since been dispelled by finance minister Amos Kimunya. The parliamentary investments committee had wanted the sale of a 25 per cent stake stopped until Vodafone Plc shed light on Mobitelea, its minority partner in Vodafone Kenya, which owns a five per cent stake in Safaricom.