Lehman Bros., Merrill Lynch, Fannie Mae, Freddie Mac, Countrywide Financial and Bear Stearns. These are some of Wall Street’s oldest and largest financial firms. They all have one thing in common: they have either been seized or outright gone bankrupt. The credit crunch, which began in the real estate market, has become the biggest global financial crisis in decades for the international business community, negatively affecting all global markets including those of the MENA region.
However, despite slowing global growth and the meltdown in US markets, Saudi Arabia, the Middle East’s largest economy and the world’s biggest oil producer, continues to register a respectable amount of IPO announcements. In September four new IPOs saw the light with a total estimated value of $1.5 billion. Meanwhile in Kuwait, the region’s largest telecom company, Zain Group has recorded the largest ever capital increase in the country’s history, raising $4.49 billion with over 1.4 billion subscriptions.
Al-Ittefaq Steel Products, Saudi Arabia’s third largest steel producer, said it will offer a 30% stake in an IPO in the last quarter of 2008. The company did not disclose the amount it would like to raise, but the company’s CEO, Shabir Rafiqi, told the press that “after the valuation the company will decide whether to go for a capital increase or sell only existing shares.” In the transportation sector, the Saudi- based National Air Services, or NAS, will launch an IPO in late September or early October to sell around 30% of its shares. The executive jet charter firm is seeking to raise $600 million. The proceeds are expected to be used to purchase several new aircraft. NAS is also expected to start new flights to Egypt, Jordan, Syria, Lebanon, India and Pakistan.
Saudi-based Al Tayyar Travel Group said it’s seeking the approval of the market regulator to launch its initial public offering in the last quarter of 2008. The company will be offering 30% of its share seeking to raise around $320 million. Sources close to the company say the IPO might take place in early October. Also in Saudi Arabia, Coast Cement or Al Sahel Cement Co., plans to sell 50% of its shares in an IPO and the other 50% in a private placement in the last quarter of 2008. The shares will be offered at SAR10 ($2.67).
Moving to the region’s hottest economy, two announcements came out of the UAE last month. The consumer goods company, Aswaaq, said it plans to offer 55% of its shares in an IPO in October. The company did not disclose the amount it seeks to raise but said it has plans to build and run 35 outlets in Dubai over the next seven years. In the precarious real estate sector, Al Benaa Real Estate Investment said it plans to launch and IPO in the fourth quarter of 2008. Although the company did not reveal the amount it wants to raise or the stake it will offer, analyst say the company will probably offer 50% of its share to the public.
Although analysts’ opinions vary on the consequences the collapse of Lehman Bros and Merrill Lynch will have on the region’s markets, they do agree that whatever happens it will be a short term blurb. The question on the lips of pundits in the US is “Who’s next? ” The consensus among US analysts is not whether the turmoil will continue, but rather for how long, with how many more casualties, and at what cost? But the economies of the region continue to weather the storm in the global financial markets and local experts say the downturn in US markets and high oil prices will only drive investors into emerging markets in record numbers.