Gulf stream: GCC IPOs off to slower start YTD but pipeline grows with new deals and hubs

Data InsightECM Explorer 19 May

Gulf stream: GCC IPOs off to slower start YTD but pipeline grows with new deals and hubs

The latest Abu Dhabi National Oil Company subsidiary listing is fueling hopes for more issuance in the Middle East after an uncertain start to the year. However, as issuers ponder challenging market conditions, GCC countries that were previously lagging in ECM activity are coming to the fore.

After the successful listing of its gas processing and marketing arm, ADNOC was back in the market with a carve-out for its energy logistics and shipping company ADNOC Logistics & Services (L&S). The all-secondary deal saw books covered almost immediately after opening, although a large chunk will go to cornerstone investors.

“UAE and Saudi had a bumper year in 2022, while this year there has been definitely a slowdown, so this is the most high-profile transaction around,” an ECM banker said.

Deal value in 2023 stands at USD 3.5bn, with around USD 456m in follow-on issuance, according to Dealogic data. The figure is in comparison to the historic USD 11bn IPO bonanza of 2022, but still a strong historical start for the region.

The worsening listing sentiment in Europe, which began in 2022, has started to reach the Gulf, where corporates and sponsors are now more reluctant to throw their hats into the IPO ring with the risk of a disappointing outcome.

Public Investment Fund (PIF)-backed ADES International Holding, a Saudi Arabian oil and gas driller, has postponed its potential USD 1bn initial public offering until the second half of the year, pinning the decision to a lack of time to conduct the deal before a lengthy public holiday in June, according to reports.

Similarly, Saudi Aramco Oil Co [TADAWUL: 2222] is likely to delay the planned initial public offering (IPO) for its energy trading arm Aramco Trading due to market conditions, as it would struggle to garner the USD 30bn valuation it is targeting, according to reports.

“Sponsors and owners are reluctant to launch a deal without the guarantee that it will be a resounding success,” one ECM lawyer said. “At a time when there is so much investment put into theses exchanges to grow, you want to keep the failure rate as low as possible. They will be cautious and won’t take unnecessary risk, maybe even more so than in Europe.”

Faisal Hasan, Al Mal Capital’s chief investment officer, said it all comes down to pricing and investor appetite, adding that the good track record in the region is the result of efforts to increase the depth of the stock market and to cultivate a more diversified pipeline.

Increasingly, advisers are also scouting other GCC countries vowing to become ECM hubs. In Oman, sovereign wealth fund Oman Investment Authority (OIA), is close to appointing a syndicate of banks to orchestrate the listing of a stake in water company Majis Industrial Services, as reported.

The Omani government has been vocal about its intention to list around 35 state-owned enterprises in the next five years, with sources saying that pitching in the country is active for a slate of IPO work.

The local pipeline also features Oman's OQ Gas Network, the pipelines business of the sultanate's state oil giant OQ, according to reports.

Asad Qayyum, the managing partner of MAQ Legal, noted that the recent IPO of OQ drilling affiliate Abraj Energy Services [MUS:ABRJ] was the biggest ever undertaken in Oman and recorded huge demand. He said a slew of further listings will create more depth in the market.

There are always new wells to tap in the GCC IPO market it seems.

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