The next big thing in initial public offerings for the Middle East will sell a slice of the world for give or take $4 billion in November. The slice amounts to 20% and the world is DP World, the UAE’s flagship global company with its fingers in harbors in almost all continents.
The flotation of DP World will gobble up about the same amount as all IPOs in the Middle East did in the second quarter of 2007. It ascertains that the region’s 2007 primary market will stand head and shoulder above the $8 billion that were raised in 2006.
Apart from being the largest beast in the short history of Arab IPO times, the DP World offer will be set apart from garden-variety offerings where the flat-rate subscription price represents an outsized discount to the company’s fair value.
Instead, institutional investors will be asked to bid for shares in mid-November and this book building will determine the IPO price within a — at time of this writing not yet announced — range. Retail investors can subscribe to the offering in early November and will have to pay the price set through the book building process.
As further mark of distinction (and new governmental strategy), DP World will debut on the Dubai International Financial Exchange (DIFX) as the first state-backed company of its size to populate the fledgling bourse and hopefully set a paradigm for liveliness more than two years after the launch of DIFX with overoptimistic short-term forecasts.
In a new batch of insurance IPOs, Al Saqr Insurance put 42% of its equity on offer on the Saudi Stock Exchange at the regulator-mandated par value of $2.67 per share and total offering size of $22.5 million, while fellow sector companies Trade Union Insurance and Arabia Cooperative launched offerings for $28.1 million and $21.4 million. Subscription for all three companies has been scheduled to close November 3.
Another two IPOs announced for the second week of November in Saudi Arabia, for educational firm Al Khaleej Training and for manufacturing firm Middle East Specialized Cables, have been approved for issue sizes of 30% each without providing details.
As recent stock market trends seemed encouraging enough, Jordan rounds off the scene with two short-notice IPOs in the under $10 million range, by Model Restaurants Co. ($8.84 million, until November 10) and Damac Jordan for Real Estate Development ($1.76 million, until November 11).
Moroccan plastics and soda producer SNEP had announced an IPO subscription offer worth up to $131.5 million for a two-day period ended October 23 but results had not been publicized by time of this writing.
Several firms joined the fray for investor interest in October; most notably Oman’s Galfar Engineering which made its entrance into the public trading square at the predicted pace and gained more than 80% in the first three days of trading.
In Jordan, the Professional Company for Real Estate Investment and Housing started trading on the Amman Stock Exchange at JOD 1.05 ($1.48) and ended its first week with a 20% gain, at JOD 1.26. Over in Casablanca, insurers Atlanta rode up 73% in 10 days between its flotation and October 26.
Shedding some light on the greater primary markets picture, a tally by international consulting firm Ernst & Young made the region’s IPO spring and early summer appear respectable but not overwhelming in global context. After a slow first quarter, the region’s primary market activity leapt in the second quarter of 2007.
Ernst & Young’s global count found the second quarter of 2007 having 531 IPOs worth a combined $88 billion worldwide. The US market recorded $15.7 billion in IPO funds gathered during the quarter. However, emerging markets contributed exceedingly to the total, led by the BRIC (Brazil, Russia, India, China) countries with $35 billion. Within BRIC, Chinese IPOs gobbled up $15.5 billion and Russians, $11.7 billion.
In relation to these numbers, the Middle East primary market activity in the second quarter of 2007 amounted to 4.4% of global capital raising through IPOs, and was equal to 11.1% of the IPO funds raised in the BRIC countries. However, by the region’s own benchmarks, the performance is impressive and latest announcements foretell much to come, with expectations focused on privatization of successful state-owned companies.
By end of October, Emirates Airlines revealed itself as the next contender for a multi-billion dollar IPO in the UAE and the general manager of the Saudi Stock Exchange told the Zawya Dow Jones news service that the bourse wants to go public as the second exchange in the region.
