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Global Slump Curbs IPO Activity in Middle East

DUBAI — The global downturn saw a huge drop in companies selling shares to the public in the region, with the total value of Middle East IPOs in 2009 comprising a mere one-sixth of funds raised in the previous year.

Regional markets raised $2.06 billion from 15 IPOs until November 25 this year, compared to the $12.46 billion in all of 2008, Ernst & Young said in a report on Tuesday.

Offerings, which were mostly in the fourth quarter, were dominated by insurance concerns. Three out of four IPOs were held by Saudi Arabian insurance companies, and one bank in Syria.

Syria’s Albaraka Bank was the biggest IPO raising, raising $37.23 million, trailed by Saudi Arabia’s Gulf General Cooperative Insurance Company (Al Khaleej Insurance) at $21.3 million. Al Alamiya Cooperative Insurance Company and Buruj Cooperative Insurance Company, also Saudi Arabia-based firms, raised $16 million and $13.87 million, respectively.

IPO activity in 2009 was dominated by three countries: Qatar raised $952.03 million, Saudi Arabia raised $1.03 billion and Syria raised $76.99 million.

“It is difficult to foresee with any certainty when the IPO activity will pick up, even though as many as 114 IPOs have been announced,” said Phil Gandier, managing partner of transaction advisory services at Ernst & Young Middle East. Globally, IPO activity started to pick-up in the second half of 2009, driven largely by deals from Asia and South America. These two regions have raised $68.6 billion in listings, accounting for 72 per cent of total IPO value.

The number of deals from January to November went down significantly in 2009, with only 459 IPOs listings, compared to 740 deals a year earlier.

However, the capital raised from these activities, at $94.9 billion, is nearly the same as 2008’s $94.6 billion.

“Emerging market activity has dominated IPO markets this year, with Chinese companies the largest source of total funds raised globally. Brazil’s stock market has seen a flurry of activity, notably in financial services.

China and Brazil are clearly playing an integral role in leading the global economic recovery,” said Gregory K. Ericksen, global vice chair at strategic growth markets at Ernst & Young.

In North America, IPO activity declined in value by nearly 38 per cent to $16.6 billion for 66 listings, compared to $26.6 billion in 2008. European IPOs only accounted for 10 per cent of total IPO deals and a modest $5.0 billion in capital raised. This is in contrast with the 160 IPOs in the region valued at $13.6 billion raised in 2008. The leading sectors by number of deals were industrials, with 77 IPOs; materials, with 68 IPOs, and high technology, with 55 deals. Fifty per cent of total capital raised were brought in by financials, industrials and real estate.

· rocel@khaleejtimes.com