While the headlines from the Gulf has been focused on the on-going Qatar spat with her GCC partners and Egypt, the international financial markets are gleefully awaiting for the latest Initial Public Offerings (IPOs) that are in the pipeline, especially from Saudi Arabia and the UAE.
With the eagerly awaited Saudi Aramco IPO is expected sometimes in 2018, and is showcased as being central to the Kingdom’s Vision 2030 transformation, the UAE’s planned IPOs are also attracting keen interest in terms of their timing and viability.
A slew of companies from both sovereign-owned and privately held, are lining up initial public offerings in a bid to capitalize on money returning to emerging-market funds this year and as states in the region make their stock exchanges more liquid.
IPO offerings have many purposes – raising capital from international investors and helping the listed companies increase their level of profitability, governance and meeting multi shareholder interests. For Aramco, it is also raising proceeds from an expected 5 percent sale to invest through the Public Investment Fund domestically and abroad and increase the Kingdom’s non-oil revenue base.
The UAE’s IPO menu is more varied and has already attracted a diverse range of international interest as diversity also brings with it diversified risk. At least six new listings from the Emirates may raise as much as $11 billion are at various stages of completion.
To put this in perspective these are a bit more than a tenth of the $100 billion Saudi Aramco IPO, although there have been many estimates that the final IPO offering value could be less than that figure.
Gulf and international investors will be spoilt for choice from the varied list of IPO offerings by appealing to different investor sectors and nudging others to consider the sameDr. Mohamed Ramady
The question is also one of timing for both countries, as the first mega IPO deals tend to suck local liquidity and attracts domestic investors, while later IPO offerings have to contend with either international investor interest or local investors selling their current portfolios and buying new offerings.
The consequence is that some listed company shares fall on the back of these fire-sales or that bank loans to individuals increase to enable new share purchases, pushing up lending rates. However, one has to put the MENA region’s IPO efforts to date in perspective with global realties.
Companies in the Middle East and Africa have raised about $2.9 billion from IPOs that began trading in the last 12 months, compared with about $204 billion worldwide, and this why the mega Aramco IPO and those planned in the UAE are attracting some genuine interest.
The UAE deals span a veritable diversity of economic sectors and includes Sanaat, GEMS, Emaar Real Estate, ADNOC, Emirates Global and Abu Dhabi Ports. Each one is attractive in its own right, ranging from government owned entities to private sector operators.
The IPO listing amounts range from an estimated $1 billion for Abu Dhabi Ports, to $3-4 billion for GEMS Education and ADNOC Services Stations. The last is an interesting IPO, for unlike the IPO of Aramco’s main company, ADNOC is deciding to sell parts of its operating units to foreign investors and it has attracted a list of blue chip underwriters like Bank of America Corp., Citigroup Inc. and HSBC Holdings Plc.
Another is Emaar Aluminium, the largest aluminium producer in the Middle East, which is considering an IPO in Dubai and Abu Dhabi, potentially making it one of the first companies to be represented on both exchanges, and setting a trend for dual listing for Gulf companies and hoping to raise as much as $3 billion.
It is owned by two of the Gulf’s sovereign wealth funds - Abu Dhabi’s sovereign fund Mubadala Investment Co. and the Investment Corp. of Dubai, making this potential IPO another first for a diverse sovereign ownership.
Largest share sale
Dubai’s Emaar Properties, the developer of the world’s tallest tower, expects to complete the IPO by November 2017, with a size similar to its Emaar Malls PJSC offering, which raised about $1.6 billion in 2014 and is the largest share sale in the UAE in the past nine years.
One of the more interesting planned IPO is that of GEMS Education, one of the Gulf’s leading education group, and the IPO is backed by some international investment banking heavyweights like Blackstone Group LP and Dubai based Fajr Capital Ltd. and wealth fund Bahrain Mumtalakat Holding Co making this also a multi investment banking initiative.
Whatever is finally decided, Gulf and international investors will be spoilt for choice from the varied list of IPO offerings by appealing to different investor sectors and nudging others to consider the same. For once, these will make the right headlines for the Gulf countries.
Dr. Mohamed Ramady is an energy economist and geo political expert on the GCC and former Professor at King Fahd University of Petroleum and Minerals, Dhahran , Saudi Arabia.