MENA IPO proceeds nearly halved in H1, but outlook is positive

EY says SPAC route has eased accessibility of markets

Laptop with a business chart on the screen. Image used for illustrative purpose.

Laptop with a business chart on the screen. Image used for illustrative purpose.

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The Middle East North Africa (MENA) region saw four initial public offerings (IPOs) raise total proceeds of $425.8 million during the first half of 2021, a 48 percent drop in proceeds when compared with the same period in 2020, despite the number of listings staying the same year-on-year, professional services network Ernst & Young (EY) said in a new report.

Matthew Benson, EY MENA Strategy and Transactions Leader said: "Our outlook on the region’s IPO activity remains positive, taking into account the continued improvement in economic conditions and stability in the region, coupled with the strong performance of oil prices we have seen thus far in 2021.”

Following the three IPOs listed in Q1 2021, the second quarter of 2021 saw only one MENA IPO issued, Taaleem Management Services, which was listed on the Egyptian stock exchange and raised $131 million in proceeds, said the EY MENA IPO Eye Q2 2021 report. The was an improvement from Q2 of 2020, when there were no public offerings, as the COVID-19 pandemic affected the global economy and created uncertainty for businesses.

In the UAE, the Abu Dhabi Securities Exchange (ADX) is currently gearing up for several potential IPOs. The Abu Dhabi National Oil Company (ADNOC) and OCI are considering the listing of their joint venture, Fertiglobe.

ADNOC, for its part, has also announced the sale of a minority stake in its drilling unit in an IPO valued at $10 billion. Mubadala Investment Company-owned satellite operator Al Yah Satellite Communicationscompleted its IPO on the ADX in Q3 2021 and raised $731 million.

However, in Dubai, the anticipated IPO of Tristar Transport, a logistics company, was cancelled after it had started its public share sale in early April. The company was planning to offer 24 percent of its shares on the DFM at an implied valuation of up to $882 million.

Surge in SPAC activity

The EY report shows a surge of special purpose acquisition companies (SPAC) activity from MENA-based companies exploring alternative routes to a public listing. "MENA companies have traditionally found it difficult to access US markets through the official IPO route, but SPACs have eased the accessibility and deepened the capital raising pool for these companies," it said.

Earlier this year, Anghami, a leading MENA music streaming platform with Lebanese roots and headquarters in Abu Dhabi, went public on Nasdaq by merging with Vistas Media Acquisition Company’s (VMAC) SPAC, at a valuation of $220 million.

Swvl Inc. a Dubai–based provider of transformative mass transit and shared mobility solutions, went public through a merger with Queen's Gambit Growth Capital (GMBT) SPAC, at a valuation of $1.5b. Trading of Swvl on Nasdaq is expected to start once the transaction is completed in Q4 2021.

Gregory Hughes, EY MENA IPO and Transaction Diligence Leader, said: “IPO activity during H1 2021 was below expectations, nevertheless the year did bring some remarkable deals with MENA companies showing an ever-increasing interest in SPAC transactions as a means to go public. We expect this trend to continue as companies seek to increase their international presence and gain access to a wider pool of investors.”

Elsewhere, sovereign wealth funds in the region, such as Saudi Arabia’s Public Investment Fund (PIF) and Abu Dhabi’s Mubadala, have also participated in notable SPAC transactions on the US markets, with PIF investing in Compute Health which is listed on the NYSE and Mubadala's Blue Whale Acquisition Corp I, which was formed by Mubadala Capital and targets media and entertainment businesses.

(Writing by Brinda Darasha; editing by Seban Scaria)

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© ZAWYA 2021

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