Commodities have driven the early summer buzz in international markets, from heated debates over new potential oil price highs and China’s expansion in international mining to merger games at the top of the global mining industry. The mining theme also dominated the month of July in the Middle East through the $2.47 billion initial public offering of the Saudi Arabian Mining Company, better known as Maaden.
Reaching the primary market more than two years after the Saudi government first announced its intentions to sell a 50% stake in the company, the Maaden IPO was 2.4 times covered by subscription demand. The amount sought in the offering was the same as in media reports in early 2007 and the allocation of shares was tilted heavily in favor of retail buyers, making the IPO appear as an example of wealth redistribution from Saudi authorities to the citizens and residents eligible for subscribing.
The Maaden flotation was the region’s largest mining IPO ever and the Arab world’s third-largest privatization by IPO, after the $5 billion sale of DP World in the UAE and the 2003 privatization of Saudi Telecom which netted the Saudi government $2.7 billion.
The second major July offering was that of UAE-based engineering contractor Drake & Scull International. Its $332.7 million IPO was oversubscribed more than 101 times, making it the public offering with the highest demand relative to the offering size in the year to date and the second highest in the past 12 months. The company, which is specialized in mechanical, engineering and plumbing contracting, floated 55% of its capital by issuing over 1.1 billion shares. It said proceeds from the IPO will be used for expansion of its business and acquisition of companies that match its expertise.
Jordan saw two smaller primary offerings which closed in July, the $7 million IPO of Al Israa for Islamic Finance and Investment and the $4.9 million IPO of Amwaj Properties. The offerings by the two firms, whose business focuses are explained by their names, reported subscription coverage of 3.3 and 15.3 times, respectively.
Meanwhile in North Africa, International Investment Bank said that the IPO of Artes, the exclusive distributor of Renault, Nissan and Dacia in Tunisia, was 11 times oversubscribed. Although retail investors are the largest recipients in these IPOs, international investors are increasing their participation and subscriptions in IPOs as more of the GCC countries allow foreign ownership.
In a quick look back to the first half of 2008, the number of IPOs in the past six months in the MENA region has reached 23 deals with a combined value of around $9 billion, according to Zawya’s IPO Monitor. Comparing this to the BRIC countries for example, one will find that Russia has closed one IPO this year so far with a mere value of $470 million. In China around $6 billion were raised in IPOs in the first half, down a whopping 60% on the same period last year. Brazil floats raised $4.6 billion, a decline of 54%. In India, primary issues were down 11% when compared to the same period last year, raising a just $4.5 billion.
Looking forward, July saw several new IPO announcements. Most noteworthy is that of the Saudi-based Arab Supply and Trading Corporation or Astra, which will float 30% of its shares to raise around $825 million. Astra is offering 22,235,294 shares to the public from July 26 to August 4. Also in Saudi Arabia, Methanol Chemicals Co., or Chemanol, plans to sell 50% of its shares in an IPO in August. The company is seeking to raise $300 million by offering 60.3 million shares through the IPO which will run from August 11 to August 20. The Jeddah-based Knowledge Economic City said it will float 30% of its shares on Saudi Stock Exchange in late 2008 and has already appointed NCB Capital and Swicorp as Joint Financial Advisors.
Out of Tunisia came what is touted as the largest IPO in the country, that of Poulina Group Holding (PGH), which is floating 10% of its capital via a capital increase. The company is seeking to raise around $85.6 million by floating more than 16.6 million shares on the Tunis Stock Exchange. The company’s principal activities are in the poultry, agribusiness and service sectors. The IPO will be launched from July 24 until August 6.
Back in the GCC, the newly-established Oman Merchant Bank (OMB) announced that it will offer 40% of its capital to the public by year end. OMB has a capital of $130 million and it did not disclose the amount it seeks to raise. In the Levant, Amman-based International Cards Company (ICC) said it will offer 39% or 7 million shares to the public on July 27. The credit card issuer seeks to raise around $41.9 million.
The flood of IPOs of young companies does not only demonstrate the success of the region’s equity markets but it also shows the industrious nature of the region’s entrepreneurial players and their will to make their countries a more prosperous and successful place to live and work. Much of the liquidity generated from high oil prices is now being invested in the region and much less is going abroad. Local business leaders have finally seen the benefits of investing in oneself or in one’s country and this enlightenment, analysts say, will only lead to even more prosperous times and many more mega IPOs.