Ghana’s Biggest IPO Starts as Agricultural Bank Sells Shares

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Ghana’s state-owned agricultural bank started the country’s biggest initial public offering yet after the share sale was delayed by a labor dispute.

The Agricultural Development Bank Ltd. seeks to raise almost 400 million cedis ($100 million) selling 74.9 million new securities and 75.5 million existing shares at 2.65 cedis each in an offer that closes Aug. 21, the Accra-based lender said in a statement on a website advertising the IPO. A further 80.6 million shares will be listed on the Ghana Stock Exchange, according to the ADB’s prospectus, published on the website.

The central bank has championed the IPO as a means of resolving a potential conflict of interest because of its 48 percent stake in the lender. Investors expected the offering by Accra-based ADB, which provides loans to farmers, processors and traders in a country that ranks second behind Ivory Coast among the world’s leading producers of cocoa, to reignite trading in a stock market where volumes have slumped more than 50 percent since 2011.

“The market isn’t deep enough, so with this we hope it will improve liquidity and activity,” Elizabeth Matekole, head of listing at the Ghana Stock Exchange, said by phone. “It adds to the exchange’s reputation because it brings impact on market capitalization and gives investors greater options. That is what we’ve been looking for.”

Trading volume fell 37 percent in the first half from a year earlier, according to data compiled by Bloomberg. The cedi has lost more than half of its value against the dollar since the beginning of 2013, deterring foreign investors from buying the nation’s assets.

ADB Valuation

The lender is valued at 1.2 times its book value and trades at 8.61 times earnings, based on the offer price, according to the sale prospectus. That compares with a price-to-book multiple of 2.10 and price-earnings ratio of 6.67 for banks on the Ghana Stock Exchange, ADB said.

The ADB, which is owned 52 percent by the government, delayed the IPO for the second time in three years last month after workers objected to the transaction, questioning why the lender left its headquarters to become a tenant in a new office block and demanding answers to why ADB’s capital fell below regulatory minimums.

‘Respond Appropriately’

“We are surprised the share sale is going ahead,” Mark Imoro, chairman of the workers’ group representing senior ADB staff, said by phone on Friday. “The unions will respond appropriately.”

Imoro said commencement of the IPO breached a decision reached during a meeting of labor, employers and government on June 22 for the IPO to be delayed to September, to allow time for management and unions to address disagreements. There was no response to two phone calls made to the office of Managing Director Stephen Kpordzih on Friday.

The lender in a statement cited by the Ghanaian Times newspaper on May 18 said allegations made against the ADB and its management are “outright lies and half-truths.”

The bank’s net income declined 41 percent to 48 million cedis in 2014 on higher loan impairment charge and rising operating expenses, according to the prospectus.

ADB said it will use proceeds from the sales to expand and upgrade its branch network, rebrand and develop its technology.

(Updates with union comment in eighth paragraph.)
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