New Year, New IPOs
Beirut (RPN) – Investors in 2009 have been battered by a seemingly never-ending series of financial crises — bubble bursts, financial meltdowns, soaring oil prices, credit crunches and falling home equity. These crises weighted down the IPO market since 2008, and yet, the regional IPO pipeline is full – 150 companies have already announced IPO plans for 2010 and beyond.
Analysts say that with pent-up demand for equity, a large pipeline of deals and realistic sellers, there is every reason to believe that 2010 will be the beginning of an active and profitable period for IPOs.
According to available data, a number of regional companies plan to list this year, reopening a market that has been virtually shut even as investors lapped up billions of dollars worth of newly issued bonds across the MENA region.
While regional and global investors nurse their wounds over Dubai World’s debt problems, there are scores of opportunities if one looks beyond the immediate car crash. With many of Dubai’s state-owned entities restructuring and struggling to keep their finances in order, the government may look to offload some of these assets, say analysts.
“A number of government-linked companies, such as Dubai World and Nakheel, have generated spectacular growth for the emirate’s real estate, shipping, transport and financial sectors over the past two decades,” notes a Societe Generale report. “Now part of that constellation of companies could be broken up as Dubai struggles under its heavy debt load. In some cases, firms could be dismembered or partially privatized.”
Many Dubai Holding and Dubai World entities can be knocked into shape for a public offering – Dubai International Capital, Jumeirah Group and TECOM Investments, Dubai Group from Dubai Holding are assets that many investors would love to have in their portfolio, ie, if they believe in the long-term Dubai story, say analysts.
Similarly, partial privatization or offering Dubai World’s Jebel Ali Free Zone and Istithmar World to the public may help Dubai Government raise finances, trim costs and focus on governance and infrastructure.
Meanwhile, new IPO announcement that came out at the end of December include big names such as Bahrain’s Gulf International Bank, with plans to float some of its shares in 2011, and Afghan carrier, Safi Airways, who is planning to launch an IPO within the next three years and list the company on one of the UAE’s stock exchanges. Abu Dhabi-based Tasheed Holding, a food and beverages conglomerate, said that it plans to launch an IPO in 2012 without providing additional details.
In Saudi Arabia, the hottest IPO market in the region, the Capital Markets Authority, or CMA, said it approved initial public offerings for three Saudi firms early next year. The Saudi homegrown fast food chain Herfy Food Services Co. will offer 8.1 million shares Jan. 11 through Jan 17. Al Sorayai Trading and Industrial Group plans to sell 9 million shares between Feb. 1 and Feb. 7, while travel agency Al Tayyar Travel Group will offer 24 million shares on Feb. 22 through Feb. 28.
In North Africa, Egypt’s private equity fund, Citadel Capital, which manages a portfolio of $8.3 billion worth of investments in across 12 countries, said it will offer 12.5% of its shares in an IPO, to raise fresh capital. The company, which will be listed on the Cairo Stock Exchange, has not yet provided a date for the IPO.
Libya, not well known for IPO announcements, is putting the final touches on plans to privatize two state-owned firms through an IPO scheduled for the first half of 2010, Soliman Shehoumi, chairman of the Libyan Stock Exchange said.
Shehoumi said that an Iron and Steel Company and National Commercial Bank are schedule to go public “ in the near future,” but he did not specify how much of the companies will be offered to the public and how much the government is seeking to raise.
The National Commercial Bank was scheduled to launch an IPO for a 15% stake of the company’s share in 2008, however, the plan did not move forward with officials citing technical delays. Central bank Governor Farhat Omar Bin Guidara said earlier this year that the government would sell a 15% stake in the bank, worth 50 million Libyan dinars, in 2009.
Economic winners of the financial crisis are definitely the MENA region. Unlike other emerging markets they are in a particularly strong position as commodities are likely to increase in value and due to the fact that they rely very little on debt – with the exception of Dubai. But even Dubai is planning on paying all of its debt in early 2010 — and have had a robust policy response to the recession.
Although no one can predict the future, analysts say conditions in the global initial public offering market in 2010 are set to noticeably improve, particularly in comparison with 2009. However, the real rebound is not expected until mid-2010.
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