MENA IPOs raise US$82.8 Mn in Q1 2012: Ernst & Young

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  • Two Saudi IPOs in Q1 and one each in Morocco and Tunisia
  • Global IPO activity falls to lowest level since Q2’09

Dubai, 05 May 2012: Ernst & Young’s 2012 Q1 MENA IPO report reveals that regional capital markets raised US$82.8 Mn in the first quarter of 2012. This is a jump of 3.8 times as compared to the US$21.7 Mn raised in Q1 2011 but only 37% of the US$226.1 Mn raised in the fourth quarter of last year. In total, four regional IPOs came to market in the first quarter this year, the same number as in Q4 of 2011.

Phil Gandier, MENA Head of Transaction Advisory Services, Ernst & Young, says: “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.”

He adds: “Even though the IPO numbers have remained more or less flat, we are seeing a growing interest from such businesses. The strategic rationale of institutionalizing 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.”

Four regional IPOs in the first quarter of 2012
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 US$62.38 Mn, followed by Tokio Marine Saudi Arabia that raised US$16 Mn. The Moroccan and Tunisian IPOs were Afric Industries SA (US$3.11 Mn) and Hexabyte (US$1.31 Mn) 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 to lowest level since Q2’09
Global IPO activity has fallen sharply in Q1 2012, according to Ernst & Young’s Global IPO update. So far this quarter, a total of 157 deals has raised only US$14.3b, down by 69% by capital raised (US$46.6b in 296 deals), compared to the same period last year. This is the lowest quarter on record since Q2 2009 when there were 82 IPOs worth US$10.4b.

Globally, this quarter was the first time when just one deal raised above US$1b since Q1 2009 when no IPOs exceeded US$1b. Average deal size decreased to US$91m compared to US$157m in Q1’11, a 42% drop.

Continued volatility in Europe in 2012
In Q1’12, European stock exchanges raised US$2.5b in 24 IPOs (18% 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 US$1.1b and Swiss market expansion services group, DKSH Holding Ltd’s US$897m 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,” says Maria Pinelli, Global Strategic Growth Markets Leader at Ernst & Young.

A slower start of the year in Asian exchanges
Despite a tough start of the year, Hong Kong, Shenzhen and Shanghai stock exchange were yet again among the top five global markets ranked by capital raised. Out of the top 20 global IPOs this quarter, 8 were listed on Asian stock exchanges, and IPO activity in those markets accounted for 47% of global IPO funds raised in Q1’12, with 84 deals completed, raising US$6.7b. However, Asia experienced a 74% drop in capital raised, compared to Q1’11 (155 deals which raised US$25.9b). The largest Asian IPO in Q1 was the US$794m listing of China Communications Construction Co on Shanghai stock exchanges. 

Global IPOs by sectors
By funds raised, almost one in five IPOs was from the industrials sector (US$2.7b in 29 deals), followed by consumer products and services (US$2.2b in 16 deals). By deal numbers over one in five IPOs was from the technology sector (US$2.1b in 35 deals – 22%).

“Technology IPOs remain very attractive to investors, who are actively looking for the right type of investment. In this environment, we expect to keep seeing big technology companies listing at home or abroad,” says Pinelli.