GCC IPOs raised $7.3 billion

The year 2014 showed strong signs of recovery in terms of initial public offering (IPO) activity in the Gulf Cooperation Council (GCC) after the slowdown in equity capital markets performance following the financial crisis. Improved market performance and macroeconomic fundamentals as well as a conducive regulatory environment were all contributing factors to positive market sentiment and investor appetite, encouraging issuers to execute their IPO plans, according to PwC’s Capital Markets.
The fourth quarter of 2014 witnessed a total of five IPOs in the GCC, raising $7.3 billion — leading to a considerable increase as compared to the same quarter last year which saw a total of three IPOs raising $179 million. IPO performance during Q4, 2014 was also stronger than the previous quarter, which saw a total of two IPOs raise $1.6 billion. The floats during Q4 included: National Commercial Bank which listed on the Saudi Stock Exchange (Tadawul), which raised $6.0 billion, making it the largest IPO during 2014 in the GCC; Dubai Parks and Resort PJSC, which listed on the Dubai Financial Market (DFM), and raised $695 million; Amanat Holdings PJSC, another DFM listing, raised $382 million; Electrical Industries Co., which listed on Tadawul, and raised $194 million; and Al Maha Ceramics, which listed on the Muscat Stock Exchange, and raised $21 million.
Looking at the IPO performance for the year, a total of 16 companies went to market, raising total proceeds of $10.8 billion, compared to 2013 when a total of nine offerings raised $702 million. Out of the total $10.8 billion raised during 2014, 68 percent was in Q4. The first half of 2014 witnessed a total of nine offerings raising $1.9 billion while H2 witnessed seven offerings raising $8.9 billion. H1 was therefore stronger in terms of number of offerings whilst H2 was stronger in terms of total offering value.
In 2014, Saudi Arabia and the United Arab Emirates played leading roles in terms of IPO activity with Saudi Arabia accounting for 38 percent of the total number of IPOs and 63 percent of total proceeds raised, and the United Arab Emirates accounting for 31 percent of the total number of IPOs and 27 percent of total proceeds raised. Tadawul continues to be the most liquid exchange in the region, and we also saw activity flourish in the UAE, specifically on DFM during 2014. Over recent years, we have also seen increasing interest from regional based companies floating on the London Stock Exchanges such as Gulf Marine Services, Al Noor Hospitals Group, Damac Real Estate Development Limited (DAMAC) and Action Hotels plc.
Steven Drake, Head of PwC’s Capital Markets team in the Middle East region said: “In 2014 we saw some impressive offerings such as the amount raised by NCB proving that the appetite for IPOs in the region had recovered. With oil prices at relatively low levels and a number of regional market indices lower than we have seen recently, the real challenge is whether or not investor appetite will remain. We should soon know the answer to this question as scheduled Q1, 2015 IPOs look to come to market.”
The European IPO market experienced an increase of 86.8 percent in money raised in 2014 after facing struggles in recent years over economic instability. The European IPO market was set for a record year, however IPO activity in the second half of 2014 was plagued by increased market volatility. A total of $69.3 billion was raised via 235 IPOs in Europe, where the LSE was the leading exchange, followed by Euronext and the Spanish Stock Exchanges. The UK IPO market saw 112 IPOs in 2014 raising a combined total of $27.9 billion, led by the $2.4 billion flotation of roadside recovery service firm AA and discount vendor B&M which raised $2.0 billion. Out of the 112 IPOs on the LSE, 14 percent were inbound IPOs from outside Europe with the majority of the issuer’s nationality originating from Asian countries. The two largest European IPOs of 2014 were executed on Euronext Amsterdam.
The largest IPO was executed during Q4, when US hedge fund Pershing Square raised $2.7 billion on Euronext Amsterdam. In Q3, NN Group, the insurance arm of Dutch financial services company ING Group raised $2.4 billion. The second largest IPO in Europe during Q4 was executed on Deutsche Börse, where Rocket Internet listed in a $1.8 billion transaction. Private Equity-backed IPOs continue to make a robust contribution to European IPO activity in 2014, accounting for 27.7 percent of the total number of deals and 47.2 percent of the total amount of money raised.