The UAE leads regionally in acquisitions for private purposes

Dubai: «The Gulf»
Ernst & Young’s report on IPO activity for the second quarter of 2021 in the Middle East and North Africa region indicated that four deals were registered in the first half of this year, with a total value of $425.8 million, which represents a 48% decrease in value compared to In the same period of the year 2020. While the number of deals was identical to what was witnessed in the same period last year.
The year 2021 saw a slow start after a slight increase in underwriting deals during the last quarter of 2020. After recording three deals in the first quarter of 2021, the second quarter saw only one deal in the MENA region, which is the listing of Taaleem Management Services on the stock exchange. Egyptian, in a deal that raised 131 million dollars. This transaction represents a slight improvement compared to the same period of the previous year, which did not record any transaction at all, against the backdrop of the consequences of the Covid-19 pandemic on the global economy and the accompanying uncertainty for companies.
Globally, the traditional performance of IPOs remained strong after the wave of momentum witnessed in the first quarter of 2021. The second quarter of 2021 saw the registration of 597 IPOs with total revenues of $111.6 billion, an increase of 206% in terms of number of deals, and 166 % in terms of value compared to the second quarter of 2020. This quarter was also the most active second quarter in terms of transaction numbers and returns over the past 20 years, breaking the previous record set in the second quarter of 2007, with 522 subscriptions worth $87.6 billion.

Direct listing momentum continues

Commenting on this quarter’s performance, Matthew Benson, Head of MENA Transaction & Strategy Advisory Services at the company, said: “The IPO market in the Middle East and North Africa region did not witness a revival during the second quarter of the year, with only one IPO registered in the quarter. The Egyptian Stock Exchange, while continuing the momentum of direct listings with six listings in a number of countries in the Middle East and North Africa. Although the number of IPOs in the first half of this year was equal to what was recorded during the first half of 2020, i.e. four deals, the total returns decreased by 48%. It is worth noting that preparations are now underway to implement several major deals expected during the second half of this year, especially in the UAE and Saudi Arabia, which indicates the presence of a strong group of companies that are considering offering their shares to the public. We remain optimistic about IPO activity in the region, especially in light of the continuous improvement in economic conditions and stability in the region, in addition to the strong performance of oil prices to date from 2021.”

Expected IPOs in Abu Dhabi Securities Exchange

In the UAE, the Abu Dhabi Securities Exchange is currently preparing to receive several initial public offerings. Abu Dhabi National Oil Company (ADNOC) and Orascom International (OCI) are considering listing their joint venture, Fertiglobe. ADNOC also announced the sale of a minority stake in its drilling unit in an IPO deal valued at about $10 billion. Al Yah Satellite Communications Company, the satellite operator owned by Mubadala Investment Company, completed its subscription on the Abu Dhabi Securities Exchange in the third quarter of 2021, raising $731 million. In Dubai, the expected IPO of the logistics company, Tristar Transport, was canceled after it began selling its public shares in early April. The company was planning to offer 24% of its shares on the Dubai Financial Market, with an implied valuation of $882 million.

Alternate paths to insertions

It is noteworthy that the report shows an increase in the activity of special purpose acquisitions by companies in the Middle East and North Africa region seeking to explore alternative ways of listings. Companies in the Middle East and North Africa have long found it difficult to access US markets through formal public offerings, but special purpose acquisitions have facilitated access to those markets and enhanced fundraising for these companies. The report concluded that the United Arab Emirates led the increase in acquisition activities for special purposes in the region. Earlier this year, Anghami, the leading Lebanese music streaming platform in the Middle East and North Africa with its headquarters in Abu Dhabi, announced its intention to go public on the Nasdaq Stock Exchange, through a merger with special purpose buyout company, Vestas. Media Acquisition Company, in a deal valued at $220 million.
As for the latest acquisition activity for special purposes in the Middle East and North Africa, it represented the launch of the third unicorn company in the region, where Swvl, a Dubai-based company specialized in providing mass transit and shared mobility solutions, announced its plans to offer its shares to the public through its merger with the company Queens Gambit Growth Capital, valued at up to $1.5 billion. Swvl shares are expected to start trading on the Nasdaq once the transaction is completed in the fourth quarter of 2021. This transaction will make Swvl the second technology startup in the Middle East and North Africa to go public through a special purpose acquisition company, following the historic Anghami deal. that paved the way for these deals, and shed light on the global ambitions of some of the companies based in the MENA region.
Meanwhile, sovereign wealth funds from the region, such as the Public Investment Fund of Saudi Arabia and Mubadala Company of Abu Dhabi, participated in special-purpose acquisitions in the US markets. Examples include the Saudi Public Investment Fund’s investment in New York-listed Computer Health, and the Mubadala Financial Investment Company’s establishment of the Blue Well Acquisition Corporation to target media and entertainment companies. Although the unprecedented increase in special purpose acquisitions is transforming and reshaping capital markets, only time will tell how the market appetite for such activities will evolve.
In this context, Gregory Hughes, Head of IPO Services for the Middle East and North Africa at the company, said: “IPO activity during the first half of 2021 was below expectations, however we have seen some significant deals, with companies from the Middle East and North Africa showing interest. The company is increasingly engaged in private buyout activities as a means of offering shares for public trading. We expect this trend to continue as companies continue to seek to increase their international presence and enhance their access to a larger group of investors. The positive performance of the stock market in the Middle East and North Africa provides a favorable platform for companies looking to list their shares, and the expectations of IPOs indicate that companies in the Middle East and North Africa have a variety of options in terms of ways available to access the capital markets.”

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