15 August 2017

Three IPOs were completed in the Gulf in the second quarter of 2017, which was one more than the corresponding period a year earlier, but much fewer than the 10 deals completed in the first quarter of the year, according to consultancy  firm PwC.

The three deals completed included just one listing on a primary market, the $96 million IPO of the Jadwa Reit Alharamin fund set up to invest in income-generating assets in Makkah and Madinah. It listed on the main Tadawul exchange. There were also two listings on Tadawul's NOMU parallel market for smaller firms - textiles company Thob Al Aseel raised $68 million and building materials company Al Kathiri raised $6.7 million.

In total, there have been 13 listings on markets within the Gulf Cooperation Council member states (which include Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Kuwait and Oman) in the first half of 2017, compared with just three in the same period last  year. However, the amount raised was 23 percent lower than in the first half of last year.

Steve Drake, the head of PwC’s Capital Markets and Accounting Advisory Services team in the Middle East, said: “During Q2 2017, the Kingdom of Saudi Arabia continued to be the main driver of IPO market activity in the GCC, while the NOMU parallel market for small and medium-sized enterprises in the Kingdom remained popular among investors.”

Debt markets were much busier, however, led by sovereign issuers. Saudi Arabia raised $9 billion through its first US dollar-denominated sukuk, while corporate bond issuers in the region included Acwa Power Management and Investments, which raised $814 million in Saudi Arabia and the Dubai branch of the Industrial & Commercial Bank of China. It issued three bonds through Nasdaq Dubai, valued at $400 million, $300 million and 500 million euros respectively.

“Debt issuance in the GCC countries remained popular throughout Q2 2017 as GCC governments’ sovereign issuance were oversubscribed domestically and internationally," Drake said. "However, consecutive interest rate hikes by US Federal Reserve may hamper GCC government debt appetite."
 
A report published last week by law firm Baker McKenzie Habib Al Mulla stated that Middle East merger and acquisition activity in the Middle East picked up significantly during the second quarter of 2017, driven largely by a couple of major outbound deals. Outbound activity tripled between April and June, reaching $17.2 billion, which is the biggest amount recorded in a single quarter since 2015. Deal volumes fell by 41 percent, though, with ten transactions concluded.

The UAE led the way, completing six deals with a combined value of $16.6 billion. The $9.05 billion buy-out of Pharmaceutical Product Development by the sovereign wealth funds of Abu Dhabi and Singapore was the biggest single deal.

The value of inbound deals fell by 38 percent to $1.84 billion year-on-year, and the volume of deals dropped by 73 percent. The biggest inbound deal was French utilities company Engie's $775 million purchase of a 40 percent stake in district cooling firm Tabreed.

Will Seivewright, a UAE-based partner at Baker McKenzie Habib Al Mulla, said that while inbound M&A deals in the Middle East "dropped in both value and volume, the overall level of cross-border and cross-regional activity that we are seeing is a promising indicator for the rest of the year.

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