MENA IPOS raise $ 82.8 m in Q1 2012

E & Y highlights 2 Saudi IPOS and one each in Morocco and Tunisia

Jeddah: Arab News Ernst & Young’s 2012 Q1 MENA IPO report reveals that regional capital markets raised $ 82.8 million in the first quarter of 2012.

This is an increase of 3.8 times compared to the $ 21.7 million raised in Q1 2011. But the figure is only 37 percent of the $ 226.1 million raised in the fourth quarter of last year.

In total, four regional IPOS came to the market in the first quarter this year, the same number as in Q4 of 2011, according to a statement from Ernst & Young.

Phil Gandier, MENA head of transaction advisory services, Ernst & Young, says: “Even though we have seen an improvement in the performance of regional bourses, this has not yet translated into a consistent increase in regional IPO activity. The IPO markets have been very quiet since 2009 mainly due to lower than acceptable valuations than private and family businesses were willing to accept.”

He adds: “Even though the IPO numbers have remained more or less flat, we are seeing a growing interest from such businesses. The strategic rationale of institutionalizing these companies and protecting them from succession issues by embarking on the IPO journey is as relevant as ever. Improvements in the secondary markets have increased the prospects of better pricing for IPOS. This translates to a subsequent increase in the readiness to go public.”

Two IPOS came to market in Saudi Arabia while one each was reported in Tunisia and Morocco respectively.

The largest issuance was of Saudi Takween Advanced Industries which raised $ 62.38 million, followed by Tokio Marine Saudi Arabia that raised $ 16 million.

The Moroccan and Tunisian IPOS were Afric Industries SA ($3.11 million) and Hexabyte ($1.31 million) respectively. “Although the funds raised in the current quarter were still low by historical standards, provided we don’t see any major regional unrest, I think we are going to see an increase in funds raised in specific markets over the

remainder of 2012,” added Phil.

Global IPO activity

Global IPO activity has fallen sharply in Q1 2012, according to Ernst & Young’s Global IPO update.

So far this quarter, a total of 157 deals has raised only $ 14.3 billion, down by 69 percent by capital raised ($46.6 billion in 296 deals), compared to the same period last year. This is the lowest quarter on record since Q2 2009 when there were 82 IPOS worth $10.4 billion.

Globally, this quarter was the first time when just one deal raised above $ 1 billion since Q1 2009 when no IPOS exceeded $ 1 billion. Average deal size decreased to $ 91 million compared to $ 157 million in Q1 11, a 42 percent drop.

Volatility in Europe

In Q1 12, European stock exchanges raised $ 2.5 billion in 24 IPOS (18 percent of global capital raised this quarter), due to hosting two of this quarter’s largest IPOS, of Dutch cable operator Ziggo, which listed on NYSE Euronext Amsterdam for $ 1.1 billion and Swiss market expansion services group, DKSH Holding Ltd’s $ 897 million listing on Swiss Exchange.

“The largest deal this quarter demonstrates that as we move further into 2012, there is a greater confidence in the capital market and the trend is slowly shifting toward companies floating a smaller percentage of their equity,” says Maria Pinelli, Global Strategic Growth Markets Leader at Ernst & Young.

Slower start in Asia

Despite a tough start of the year, Hong Kong, Shenzhen and Shanghai stock exchange were yet again among the top five global markets ranked by capital raised.

Out of the top 20 global IPOS this quarter, eight were listed on Asian stock exchanges, and IPO activity in those markets accounted for 47 percent of global IPO funds raised in Q1 12, with 84 deals completed, raising $ 6.7 billion.

However, Asia experienced a 74 percent drop in capital raised, compared to Q1 11 (155 deals which raised $ 25.9 billion). The largest Asian IPO in Q1 was the $ 794 million listing of China Communications Construction Co. on Shanghai stock exchanges.

Global IPOS by sectors

By funds raised, almost one in five IPOS was from the industrials sector ($2.7 billion in 29 deals), followed by consumer products and services ($ 2.2 billion in 16 deals). By deal numbers over one in five IPOS was from the technology sector ($ 2.1 billion in 35 deals — 22 percent).

“Technology IPOS remain very attractive to investors, who are actively looking for the right type of investment. In this environment, we expect to keep seeing big technology companies listing at home or abroad,” says Pinelli.