Saudi aviation IPO starts

03 June 2015

Service provider hopes to raise $747m


  • Saudi Ground Services has begun subscription for its initial public offering
  • It hopes to raise SR2.8bn ($747m)
  • Initial public offering has begun to pick up, with the third listing this year

Retail subscription has begun for the initial public offering (IPO) of aviation services provider Saudi Ground Services (SGS), and will continue until 9 June.

The company is floating 56.4 million shares, or 30 per cent of its shares on the Saudi Stock Exchange (Tadawul).

It hopes to raise SR2.8bn ($747m).

SGS is offering 22.56 million shares to retail investors. Its offering to institutional investors was nine-times oversubscribed.

It made gross profits of SR882m in 2014, an increase of 5 per cent on its 2013 profits.

Saudi Arabian Airlines will continue to hold a majority stake in the company.

SGS’s financial advisor is London-based HSBC.

The Tadawul is preparing to open to direct foreign institutional investors (Qualified foreign investors – QFIs) on 15 June. Analysts expect the measured influx of foreign capital to increase trading and listing activity.

However, initial public offering (IPO) activity has slowed as lower oil prices effect confidence. Only three companies have listed on the Tadawul in 2015. Saudi Tools and Hardware Company raised SR504m ($134m) while Middle East Paper Company raised SR624m.

“There are a number of factors that impacted the IPO market in quarter 1 2015 including oil price and market fluctuations although the market fundamentals remain good for IPO activity in 2015” says Mayur Pau, partner and Middle East and North Africa (Mena) IPO leader at London-based EY.

Activity may pick up after foreign investors enter the market. EY counts another 16 Saudi companies in the IPO pipline for late 2015 and 2016.

“Saudi Arabia, Egypt and the UAE are expected to be active,” says Pau. “We expect liquidity levels to improve in the Saudi market, although they are already good, once the final rules regarding the opening up of the Saudi market for foreign financial institutions are announced and active.”

QFIs cannot take part in IPOs. They are reserved for Saudi nationals, who may then make significant margins by selling on these shares.


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