Alwaleed’s global stature has turned heads at the bourse, but the transaction is just one of a string of offerings that have come to London from the Middle East in recent months. In December, Telecom Egypt offered 20 per cent of its shares in a cross-listing at the LSE and the Cairo & Alexandria Stock Exchanges (CASE) worth $892 million – the largest ever equity offering from a regional company. Bank Muscat, UAE-based integrated contractor Petrofac International and Beirut-based emerging markets telco Investcom all listed on the LSE in October, followed by Jordan’s Hikma Pharmaceuticals (see table).
More are expected to follow. ‘It [the Middle East] is a big region with burgeoning wealth, a hugely vibrant and growing population and plentiful natural and financial resources,’ says Graham Dallas, senior manager of international business development at the LSE. ‘There are significant international players in a number of different sectors. We hope to see a steady flow of high-quality companies from the region coming our way.’
The era of high oil prices has fuelled frenzied activity in the region’s bourses – around 100 IPOs are expected in the GCC alone in 2006. While many other emerging market companies listing at the LSE are driven by the need to access fresh capital, companies from the Middle East – and in particular the Gulf – are looking at London for different reasons.
‘In the Middle East, access to capital frankly is not really an issue – there is plentiful capital available locally,’ says Dallas. ‘One of the things that we have seen recently is the emergence of genuine industrial champions; companies that within their industry and within their sector are clear regional and global leaders. I think what these companies are looking for is the chance to take their place on the global stage alongside their international peers. It is really about raising their profile to the market in the wider sense – not just to divide their shares but to build the value of their brand.’
Companies have more to gain than simply enhancing their credibility. By listing on a market with tight regulations such as the LSE, companies can demonstrate that they meet international best practice standards of corporate governance, disclosure and accounting. ‘I also think that a regulator is often quite happy that a company from its market goes through the listing process at the LSEbecause it tends to bring local standards and practices more closely in line with international best practice,’ says Dallas.
And while access to funding is a low priority for many Gulf companies now, it could become an issue in the future. By listing on both foreign and domestic exchanges, companies such as KHI and Telecom Egypt can keep their options open. ‘Markets change and circumstances change, so to diversify is only prudent,’ says Dallas.
While Dallas welcomes the increased flow of transactions from the region, he warns that a listing requires careful consideration. ‘It is not a solution for every single company that wants to raise its capital or its profile, or that wants to broaden its shareholder base,’ says Dallas. ‘It is only going to work if it is something that fits a company’s financial, strategic and operational goals and the company itself fits a fairly broad and flexible profile of international investors.’
With corporate profitability expected to remain strong this year, many regional companies are in a good position to head to the international markets. It remains to be seen which companies will follow the lead of KHI and Investcom, but a growing number of Middle East firms fit the profile, from industrial heavyweights such as Saudi Basic Industries Corporation (Sabic) to prime real estate developers such as Dubai-based Emaar Properties. Chances are that by the end of 2006 many will have left their mark on the LSE.