May 06 2012
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Regional firms raise $82.8m with IPOs in first quarter
However, it is only 37 per cent of the $226.1 million raised in the fourth quarter of last year, said Ernst & Young in its Mena IPO report.
In total, four regional IPOs came to market in the first quarter this year, the same number as in fourth quarrter of 2011.
"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," said Phil Gandier, Mena Head of Transaction Advisory Services, Ernst & Young.
"Even though the IPO numbers have remained more or less flat, we are seeing a growing interest from such businesses. The strategic rationale of institutionalising 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," he added.
Four regional IPOs
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 falls
Global IPO activity has fallen sharply in the first quarter of 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 per cent by capital raised ($46.6 billion in 296 deals), compared to the same period last year. This is the lowest quarter on record since the second quarter of 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 the first quarter of 2009 when no IPOs exceeded $1 billion. Average deal size decreased to $91 million compared to $157 million in the first quarter of 2011, a 42 per cent drop.
Continued volatility in Europe
In the first quarter of 2012, European stock exchanges raised $2.5 billion in 24 IPOs (18 per cent 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 towards companies floating a smaller percentage of their equity," said Maria Pinelli, Global Strategic Growth Markets Leader at Ernst & Young.
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