Mumtalakat to reinvest proceeds of Alba sell-off internationally

19 October 2010

The company’s current international investments comprise 2 per cent of its portfolio

Bahrain sovereign wealth fund Mumtalakat is to invest proceeds from the BD204m ($540m) flotation of Aluminium Bahrain (Alba) in international markets as part of its plan to reduce the proportion of local investments held in its portfolio.

We are now looking to invest in the capital markets, hedge funds and fixed-income products

Talal al-Zain, Mumtalakat

The company said in 2008 that it was planning to increase the share of international investments in its portfolio from about 2 per cent, to 50 per cent. So far though, progress has been slow, and the company said in March 2009 that it was focusing on managing existing assets.

The Alba initial public offering (IPO) is a sign that Mumtalakat is now preparing to move forward with the strategy. “We want to start shifting our portfolio of investments to be split 50 per cent between the Mena region and 50 per cent global,” says Talal al-Zain, chief executive officer of Mumtalakat.

“The fund is very well diversified from a sector point of view, but highly concentrated from an asset class and geography perspective. We are almost 100 per cent directly invested in the private equity asset class, which is illiquid and a longer-term investment. We are now looking to invest in the capital markets, hedge funds and fixed-income products.”

Mumtalakat’s investments are currently mostly concentrated in Bahrain, with a few investments in the Gulf. Its 30 per cent stake in the UK’s McLaren Group remains its only international investment, comprising about 2 per cent of its overall portfolio.

“We don’t think that as a sovereign wealth fund, we need to have 100 per cent ownership in Gulf Air or an 80 per cent stake in Alba,” says Mahmood al-Kooheji, chairman of Alba and deputy chief executive of Mumtalakat.

“Alba is now at a stage where we are happy with its performance and we have a clear strategy, so we feel confident to ask the private sector to share in its future growth,” he adds.

An IPO of Gulf Air would be considered if the “time is right”, according to Al-Khooheji, although on 19 October, the government approved a $1.06bn increase in its 2010 budget for the airline. “This is to help finance its future plans as the airline is going through a big restructuring,” says Al-Kooheji.

Under Alba’s IPO plans, it will list shares on the Bahrain Stock Exchange and global depository receipts (GDRs) on the London Stock Exchange. The decision to list GDRs in London was taken because of concerns about appetite for the listing in Bahrain, while balancing the desire to stimulate the local market.

“By talking to investors and market practitioners, we realised there wasn’t enough retail depth to structure it as a 100 per cent retail offering, so they advised us to list GDRs,” says Al-Kooheji.

“The Bahrain exchange isn’t performing as well as we would like but the government believes the listing of a big company like Alba will be a major stimulus,” he adds.

Alba will offer 163.3m shares at BD1.25 per share to retail investors, while the price range has been set at BD0.900-1.250 a share for institutional investors. The retail tranche will account for 25 per cent of the shares offered, and has been fully underwritten by the US’ JPMorgan and Citigroup.

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