Saudi Arabian Airlines to raise $2.7b in IPOs

Saudi Arabian Airlines (Saudia) plans to raise at least SR10 billion ($2.7 billion) through the sale of shares in its ground-handling, cargo and maintenance units.

An initial public offering of the ground-handling unit valued at SR2 billion will take place “in weeks,” Saudi Arabian Airlines’ Chief Financial Officer Muhammad Albakri told reporters in Dubai. The sale of shares in the cargo unit is planned for next year, while the maintenance section of the business will IPO in 2017, he said. Saudi Arabian Airlines will sell 30 percent of both at “at least” double the value of the ground-handling division, he said.

IPO activity in Saudi Arabia, home to the Gulf region’s largest stock market, is quickening after markets rallied and valuations improved.
Subscription opened for National Commercial Bank’s share sale this week, which at SR22.5 billion will be the second-largest IPO in the world in 2014 after Chinese e-commerce business Alibaba.

The Kingdom decided in 2006 to privatize six units of its national carrier. Saudi Airlines Catering, the first such business to be sold publicly, raised $347 million after the sale of a 30 percent stake in 2012.

Given the successful IPO the catering unit, “it’s very natural for Saudi Airline to try and do another one,” Amer Khan, senior executive at Shuaa Asset Management in Dubai, which oversees more than $300 million in assets, said.

Saudi Ground Services plans to sell 30 percent of its business, three people with knowledge of the matter said in March. HSBC Holdings Plc is advising, they said at the time.

The company will also decide on the sale of a bond or sukuk in the next six months, Albakri said. The cash raised will be used to consolidate debt and fund new aircraft as the airline seeks to double its fleet by 2020, he said

This article was first published in the Saudi Gazette on Oct.21, 2014.