While Western financial markets remain entangled in the subprime crisis and its economic fallout, the appetite for initial public offerings (IPOs) in the Middle East shows little sign of abating, leading industry watchers said. Furthermore new UAE federal legislation expected soon could also spur further IPOs. “Legislation is expected to reduce the minimum amount of shares a company must sell from 55 percent to 30 percent, which would allow the founder members to retain their majority stake,” said Deep Marwaha, senior conference manager of the 3rd Middle East IPO Summit, which opens on Sunday (March 16) at the Intercontinental Hotel, Abu Dhabi. “This move could actually lead to a flurry of new IPOs by family-owned businesses, eager to generate capital but reluctant to relinquish control.” To illustrate the point, Al-Qudra Holdings of Abu Dhabi recently postponed the first portion of a planned total 55 percent share offering. That IPO is expected to happen later in the year, however, with the company saying it is waiting for a new federal law on minimum public offering requirements. Overall the GCC markets in particular are reaping the benefits of record oil prices that have surged more than five-fold during the last six years, investing the proceeds in infrastructure, industry and real estate, and spurring an economic boom being reflected in increased stock market listings. “Well priced companies with a good business case in today's economic environment - particularly Islamically-structured financial institutions - are much sought after,” said Marwaha. “Most observers confidently expect Gulf Arab companies to sell more than $10 billion of stock to the public during the next three years,” he added. Marwaha gave an example from earlier this month when investors offered in the region of AED48 billion ($13.07 billion), for Shariah-compliant Ajman Bank. That was 86 times more than the bank was looking for and proved to be the most heavily subscribed IPO in the UAE over the last 15 months. Ajman bank lists its shares on the Dubai Financial Market next month. In addition, the IPO of Abu Dhabi-based Islamic insurer Mithaq Lil Takaful was also 43 times oversubscribed in February. The Ajman Bank IPO, the UAE's second this year, was the most heavily subscribed since Dubai sold shares in a public and private sale of Dubai Financial Market in November 2006. That was more than 300 times oversubscribed. The 3rd Middle East IPO Summit hosts investment experts, regulators and market leaders who will examine regulatory issues as well as new products and issues impacting the investment environment. The summit opens with a Middle East Investment Day featuring some of the leading regional investment experts. They include Arif Naqvi, CEO of Abraaj Capital, recently dubbed the “Master of the Middle East Buyout”; Henry Azzam, CEO Middle East and North Africa, of Deutsche Bank and Ziad Makkawi, CEO of Algebra Capital. There will also be an Executive Masterclass by contrarian investment guru, Hong Kong-based Dr. Marc Faber. __
