Press release

A healthier economic environment in the GCC region lays the foundation to a stronger IPO market for 2013

Dubai – February 2013: Initial Public Offering (IPO) activity remained relatively stable in the six-nation Gulf Cooperation Council (GCC) with two IPOs raising USD 250 million in Q4 of 2012 compared to Q3 2012where one IPO raised USD 252 million.

Total proceeds raised from the two IPOs in Q4 2012 were 15% higher than the amount raised from the three IPOs in Q4 2011 of USD 212 million, showing a modest improvement compared to the previous year. The two IPOs during Q4 2012 included the Saudi based Dallah Healthcare Holding Company which raised USD 144 million and that of Alizz Islamic Bank raising USD 106 million in Oman.

Looking at the 2012 IPO market performance in the GCC region, there were a total of 9 IPOs raising USD 1,684 million compared to the same number of IPOs in 2011 raising USD 789 million, increasing significantly by 113% in terms of offering value. Q2 2012 proved to be the strongest in terms of IPO performance both in number and offering values with 4 IPOs raising a total of USD 1,104 million, 77% higher than the total proceeds raised in Q4 of the year.

Saudi Arabia dominated the IPO market with 7 IPOs raising USD 1,420 million thereby contributing 84% to the total value raised in the GCC during 2012. The other two listings were in Oman one each in the second and Q4 of 2012 raising USD 264 million in aggregate. The Tadawul also hosted the largest IPOs in 2012 was the Al Tayyar Travel Group which raised a total of USD 365 million, closely followed by Saudi Airline Catering Company which raised USD 354 million. Both of these issuances were over-subscribed and have performed strongly in the after-market.

The three UAE stock exchanges remained largely inactive during 2012 in terms of domestic IPO activity compared to the previous year which witnessed 3 IPOs. However, there were two cross-border offerings of two UAE based entities during 2012 with NMC Health listing on the London Stock Exchange raising USD 187 million and Amira Nature Foods listing on the New York Stock Exchange and raising USD 90 million.

Steven Drake Head of PwC’s Capital Markets in the Middle East region said: “2012 continued to be a challenging year for the regional equity markets with valuations and pricing generally being depressed. Although IPO proceeds did increase during 2012, the relatively low number of IPOs demonstrated the continued suppressed demand for equity as an asset class.

Looking forward to 2013, we would largely expect to see the regional exchanges track global trends and so until we see significant improvements in the more developed markets, we could perhaps expect to see low regional IPO volumes.

The one possible exception to this would be Saudi Arabia where we have seen some positive gains on the Tadawul in the second half of 2012. This may well explain why we at PwC have seen an increase in IPO interest in the Kingdom. If valuations remain relatively robust going into 2013 then we would be more optimistic about IPO activity in the Kingdom since our sense is that there remains latent demand within the issuer community”.

The value of IPOs in Europe increased by more than seven-fold year on year in Q4 of 2012, making it the strongest performance since Q3 2011, which saw 121 IPOs raise USD12.4 billion. 70 IPOs raised USD10 billion in Q4 2012 compared with 78 IPOs raising USD1.2 billion in Q4 2011. The quarter was dominated by the IPOs of Direct Line and Megafon in London and Talanx and Telefónica Deutschland in Germany which accounted for 57% of the proceeds raised in the quarter.

Looking at the year as a whole, 2012 proved a challenging year with 263 IPOs raising just USD14.5 billion, compared with 430 IPOs raising USD35.4 billion in the prior year, a 59% decline in value. London remained the dominant market in Europe in 2012 with 73 IPOs raising just USD6.8 billion compared with 101 IPOs raising USD18.8 billion in 2011, which was boosted by the jumbo IPO of Glencore which raised USD9.2 billion. After a quiet summer, London finished the year strongly with 26 IPOs raising USD5.2 billion in Q4 compared with 17 IPOs raising USD1.1 billion in the same quarter of the prior year.

During 2012, the bond markets in the GCC fell behind 2011 as government issuances receded compared to the previous year. Within the GCC, the UAE continued to dominate the conventional bond market with large issuances on both the corporate and sovereign fronts during Q4 of 2012. The Abu Dhabi National Energy Co. (Taqa), issued a USD 2 billion corporate bond in two tranches in December 2012 maturing in 2018 and 2023 respectively. Another prominent UAE issuance was the government-owned International Petroleum Investment Company’s USD 2.9 billion sovereign bond, which was issued in three tranches. Among other GCC countries, the Central Bank of Kuwait remained active in Q4 of 2012 with total sovereign issuance of USD 3.8 billion having short-term tenors between 3 and 6 months.

The sukuk market ended the year with yet another strong quarter reflecting growing investor confidence in the asset class. Abu Dhabi Islamic Bank issued the first of its kind, USD 1 billion hybrid perpetual tier 1 sukuk in November 2012 carrying a coupon of 6.375%. The issue was 30 times oversubscribed underpinning strong investor demand. Qatar also remained active in Q4 with 5 year corporate sukuks issued by Qatar International Islamic Bank and Qatar Islamic Bank raising USD 700 million and USD 750 million, respectively. The year 2012 also witnessed the largest sukuk issuance by the Saudi Arabian General Aviation Company raising nearly USD 5 billion at the start of the year.

Steven Drake said: “The low profit rates achieved on Islamic instruments are highly attractive to issuers in the region as they tend to be a lower cost option to conventional debt. We expect this trend to continue into 2013, as confidence in debt markets on the back of early signs of stability in the euro-zone area which would augment the debt markets in the GCC.”

-Ends-

Notes to editors:

1. About Capital Markets Watch GCC

Capital Markets Watch GCC surveys conventional bond and Islamic issuance and new primary market equity IPOs on GCC’s principal stock markets and market segments (including exchanges in Kingdom of Saudi Arabia, Kingdom of Bahrain, Kuwait, Sultanate of Oman, Qatar and the United Arab Emirates) on a quarterly basis. This survey was conducted between 20 December 2012 and 31 December 2012 and captures the relevant data based on their transaction date. Capital Markets Watch GCC is prepared by PwC Middle East (www.pwc.com/middle-east). All market data is sourced from publically available information and has not been independently verified by PwC.

2. About IPO Watch Europe

IPO Watch Europe surveys all new primary market equity IPOs on Europe’s principal stock markets and market segments (including exchanges in Austria, Belgium, Denmark, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK) on a quarterly basis. Movements between markets on the same exchange and greenshoe offerings are excluded. IPO Watch Europe is prepared by PricewaterhouseCoopers LLP (www.pwc.com/uk) a limited liability partnership incorporated in England. PricewaterhouseCoopers LLP is a member firm of PricewaterhouseCoopers International Limited.  All market data is sourced from the stock markets themselves and has not been independently verified by PricewaterhouseCoopers LLP.
IPO Watch Europe Surveys and annual reviews are available at: http://www.pwc.co.uk/eng/publications/IPO_Watch_Europe_previous_editions.html

3. About the PwCs’ Capital Markets and Accounting Advisory Services Team in the Middle East

The Capital Markets and Accounting Advisory Services Team in the Middle East is part of the PwC’s global network of capital markets specialists who provide a broad range of advisory services to companies and investment banks in connection with capital market transactions. These include preparations for becoming a public company, selecting the right market and advisory team, assisting with reviewing accounting policies and GAAP conversion projects, advising on regulatory issues and undertaking financial and business due diligence investigations.

4. About PwC

PwC helps organisations and individuals create the value they’re looking for.  We’re a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services.  Tell us what matters to you and find out more by visiting us at www.pwc.com.
Established in the Middle East for 40 years, PwC has firms in Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, the Palestinian territories, Qatar, Saudi Arabia and the United Arab Emirates, with around 2,500 people. (www.pwc.com/middle-east)

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
©2013 PricewaterhouseCoopers. All rights reserved