UAE and Saudi Arabia to drive higher initial public offering activity

11 February 2014

At least 10 UAE IPO’s are understood to be in the planning

UAE and Saudi companies are set to drive higher initial public offerings (IPOs) activity in 2014.

At least 10 UAE IPO’s, including Gulf Marine Services, Stanford Marine Group and Just Falafel, are understood to be in the planning, with some expected to come to the market next month, say sources.

In Saudi Arabia, a strong pipeline of offerings is awaiting regulatory approval.

The listings will put an end to the IPO drought of the past four years, when total value ranged from $890m to $3.6bn a year - well short of 2007’s $9.6bn, data from Dealogic shows.

“The rebound of the UAE economy and uptake in demand is likely to lead to better valuations, which would result in increased IPO activity. In Saudi Arabia there are two major drivers: the government pushing select family businesses and government entities to share their wealth with the wider public and family businesses corporatising and creating liquidity for estate and inheritance planning purposes,” says Anil Menon, Mena mergers and acquisitions and IPO Leader, EY.

 “We’ve seen only five [IPO’s by Saudi companies] in 2013, which is [a] very small [amount] compared to previous years. There were some changes at the regulator that also pushed some transactions away, but there will definitely be more this year,” adds Khalid Nasser al-Muammar, chief executive officer of investment banking firm Saudi Hollandi Capital.

In the UAE, many companies are expected to pursue listings on exchanges abroad following the IPOs of Abu Dhabi’s Al-Noor Hospitals Group and Damac Properties on the London Stock Exchange in 2013.

UAE stock markets’ limited liquidity pool, as well as high free float requirements of 55 per cent of capital, are seen as the main reasons companies increasingly look beyond the region.

Plans to lower free float requirements to 30 per cent of capital and to introduce market-based valuations could help attract more listings, though the inability to sell down existing shares could still deter some.

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