According to an Ernst & Young report

• Fivefold increase in funds raised in Q1 2010 over Q1 2009
• Total of six Middle East IPOs – five in Saudi Arabia and one in Qatar
• Mazaya Qatar Real Estate Development Company, with an offer size of US$144.21M, was the largest regional IPO in Q1 2010

May 2010 – Initial Public Offering (IPO) activity in the Middle East has risen significantly in the first quarter of 2010, recording a fivefold increase in the funds raised, according to Ernst & Young’s Middle East Q1 2010 IPO Update. Regional IPOs in the first quarter of this year raised US$420.5M from six IPOs compared to US$83.6M in the same period last year.
According to Phil Gandier, Head of Transaction Advisory Services for Ernst & Young Middle East: “The trend mirrors the performance of the global IPO markets in Q1 2010. The regional upturn in number and size was largely based on the performance of the Saudi and Qatari markets. The regional markets also performed better than the last quarter which raised US$91.6M in Q4 2009 from 5 IPOs. While it’s too early to decree that markets have rebounded, this could potentially signal the return of normalcy to the markets, which had a very difficult 2009.”
Five IPOs in Saudi Arabia and one in Qatar made up the geographical composition of the regional IPO market for the first quarter of 2010. Mazaya Qatar Real Estate Development Mazaya Qatar Real Estate Development Company with an offer size of US$144.2M was the Middle East’s largest IPO, followed by Saudi Arabia’s Herfy Food Services (US$110.2M) and Alsorayai Trading Industrial Group(US$64.8M). Solidarity Saudi Takaful, Amana for Cooperative Insurance and Wataniya Cooperative Insurance were the other three with offer sizes of US$59.2M, US$34.1M and US$8M respectively. Saudi Arabia also led the IPO tally in the previous quarter – 3 out of the 5 Middle East IPOs were in the Kingdom.
Commenting on market appetite and investor confidence cautiously picking up, Phil adds: “The largest oversubscription in Q1 2010 was received by Herfy Food Services at 4.6 times offer size. This could be symptomatic of the caution with which new IPOs will be greeted in 2010. We may not see the hundreds or even tenfold oversubscriptions that were witnessed during the boom years. Firms will need to invest more time and resources in preparing their institution for an IPO and ensuring they have a compelling equity story. While challenging markets will come and go, it’s the companies that are fully prepared that will best be able to leverage IPO opportunities when they open.”
Out of the total 6 IPOs this quarter, 3 were in the Insurance/Takaful sectors. This trend was also observed in the previous quarter, when the regional markets went through a difficult phase. In Q4 2009, 3 out of 5 IPOs were for Insurance firms. “Insurance licensing procedures in Saudi Arabia, which opened up the sector to new entrants in 2005, oblige newly licensed firms to offer a percentage of their shares to the public within a set timeframe. This is why we see a disproportionate number of IPOs in the Kingdom’s insurance/Takaful sector,” Phil explains.
Global IPO activity in the first quarter of 2010 showed substantial improvement over Q1 2009. Results were driven by a ongoing robust Asian market and the revival of European listings. There were 267 deals globally in Q1 2010 worth US$53.2billion, compared to the 52 deals which raised US$1.4B in Q1’09 (which had the lowest IPO activity in the past decade). Asia continued to experience significant IPO activity in the quarter, with 166 IPOs raising US$35.1B, 66% of the quarter’s total IPO fund raising. Nine of the twenty largest IPOs were from Asia (China, Japan and South Korea).
Commenting on IPO activity across the globe, Samar Obeid, Partner at Ernst & Young Jordan, said: “Major IPO markets across the world including London, Paris, Tokyo and Frankfurt have witnessed significant recovery during the first quarter of this year. Other developing markets across the world also grew despite investor cautiousness. We are expecting that the IPO market will continue to grow in European and North American Markets, especially as economic conditions improve. Forecasts for Asian, North American and European IPO markets during the second quarter of 2010 are high and forecasts for global IPO activity in 2010 are positive as a result of the returning stability to global capital markets, a strong IPO pipeline and improved market liquidity. Issuers are currently waiting for the right window of opportunity to complete their listings to generate better IPO pricing.”

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