Value of share offerings in Mena surge ten-fold

06/11/2014 05:19 AST

The initial public offerings (IPOs) in the Middle East and North African (Mena) region raised $1.7 billion in the third quarter of 2014, a ten-fold increase from the $150.7 million raised in the same period last year, according to EY's Mena pdate

The IPO activity in the third quarter was limited to three IPOs — Emaar Malls listed on the Dubai Financial Market (DFM) in the UAE, Zain Bahrain (Bahrain) and Délice Holding (Tunisia).

Phil Gandier, Mena head (Transaction Advisory Services) of EY said that Mena IPO activity is expected to surge in 2015, particularly in the Gulf Cooperation Council (GCC) states, with market valuations returning to somewhere near pre-financial crisis levels.

"Companies in the financial services and real estate sectors continue to dominate the pipeline. With a growing regional economy and regulatory initiatives being implemented, investor confidence is expected to rise and bring liquidity to the market," he said.

Phil further said that government spending on infrastructure and diversification of oil-based economies has created more opportunities in the private sector and these continued developments are expected to encourage companies to raise capital from the market.

"The third quarter witnessed the largest IPO of 2014 to date. Emaar Malls raised $1.6 biliion, potentially signaling a shift in the regional business perception of local markets. The IPO, which closed in September this year, was oversubscribed by 30 times, indicating growing investor confidence and appetite to deploy capital which has been waiting on the sidelines," said Phil Gandier.

Emaar Malls was one of the first companies to capitalise on planned regulatory reforms in the UAE by being exempted from having to float 55 per cent of the existing shares, ahead of the new regulations being implemented. The group floated close to 15 per cent of its shares on the Dubai Financial Market to raise $1.6 billion.

Mayur Pau, Mena IPO Leader of EY, says: "The third quarter historically has the lowest activity of the year and this trend has continued in 2014. The third quarter of 2014 has been relatively slow in terms of IPO volume compared to other quarters due to the quiet summer period. However, the strong fundamentals of the Mena region and improved valuations are likely to drive IPO volume, with a significant backlog expected to come to market over the next quarters as companies wait to go public at the right time."

The Mena capital markets have been introducing new reforms and relaxing their rules in an attempt to encourage local companies to consider domestic IPOs. The Saudi Tadawul's recent announcement to open its stock market to direct investment by foreign financial institutions is likely to raise its profile on the international scene.

Given the forthcoming changes in UAE regulations, a further potential boost for the UAE stock market is the proposed listing of DAMAC, the luxury property developer, on the DFM. DAMAC has global depository receipts currently listed on the London Stock Exchange.

"The more relaxed regulations are increasing the attractiveness of local markets. Regional regulators are continuing to focus more on measures to increase IPOs, thus leading to a much-needed deepening of the equity market in the region and improved sentiment from global investors. Mena regional authorities have also been streamlining IPO rules to encourage some of the region's family business to list as a way of making business more transparent," said Mayur.

A number of funds based in Mena that specialise in IPOs have made impressive returns in recent times. Since valuations are back to an attractive exit level, most of the investments are gradually being restructured and the pressure for monetizing them is growing which has led to a healthy IPO pipeline. IPO funds represent the most efficient option for institutional investors

Times of Oman