Middle East IPOs raise $83.6m in first quarter of 2009, says Ernst and Young

Compared to the $3.98bn raised through 13 IPOs in the first quarter of 2008, only $83.6m was raised though two IPOs in the first quarter of 2009 in the Middle East. This is 2.1% of the Q1 2008 figure in terms of total capital raised.

Saudi Arabia's Etihad Atheeb Telecommunications Company, which raised $80m and listed on the Riyadh Stock Exchange, was the largest IPO in the Middle East during this period. It was ranked third in terms of capital raised amongst a total of 50 IPOs worldwide, all of which raised just $1.4bn.

A Syrian company, Al Adham Foreign Exchange Company, was the only other regional IPO in Q1 2009. It raised $3.62m and listed on the Damascus Stock Exchange.

Mead Johnson Nutrition, which raised $828m on the New York Stock Exchange, the Chinese company Real Gold Mining Ltd, which raised $133.01m on the Hong Kong Stock Exchange and Etihad Atheeb Telecommunications Company were the three largest IPOs globally and accounted for 75% of the capital raised during this quarter.

According to Azhar Zafar, Head of Mergers & Acquisitions, Ernst & Young Middle East, "The deal threshold required to make the top 20 global IPO list has fallen significantly over the past year - $6.84m in Q1 2009 compared with $126.9m in Q1 2008. The difference between the threshold values for the top ten is even more marked, falling from $416.5m in Q1 2008 to $10.11m in Q1 2009.''

Phil Gandier, Head of Transaction Advisory Services for Ernst & Young Middle East, added, "Of the 136 regional companies that have announced IPO plans, we do not expect more than a handful to list during the next quarter. The regional IPO juggernaut of 2007 and 2008 has come to an abrupt halt over the last two quarters. A turnaround in its numbers will be based on signs of global economic recovery. Firms are assessing investor appetites and market sentiments before committing to any plans. The long term outlook can potentially make up for slack in the short to medium term periods."

Data from Dealogic shows that globally, 37 IPOs have been postponed or withdrawn in Q1 2009, which follows from 85 in the previous quarter. The decline may be due to lower levels of filings in recent months. However, the 2009 IPO pipeline remains robust.

Gil Forer, Global Director of IPO initiatives at Ernst & Young, comments: "First quarter results show that the global financial crisis has had a deep impact on the IPO market and the timeframe for recovery will be much longer than people initially thought a year ago. There are, however, many quality companies from both developed and emerging markets, which have delayed or deferred their public listings. These companies continue to ready themselves to go public while waiting for market conditions to stabilize."

The leading sectors by number of deals were Industrials (9 IPOs); High Technology (7) and Materials (7). Due to the low value of funds raised, the top three sectors by capital raised mirror the top three IPOs. Consumer Staples ($843.1m), Metals, Mining and Paper ($162.2m), and Telecoms ($144.7m) accounted for 83% of total capital raised.

By funds raised, the top three exchanges in Q1 were the New York Stock Exchange which despite only 2 IPOs (Mead Johnson and a $1.9m Chinese listing) accounted for 59.76% of capital raised ($829.9m); Hong Kong Stock Exchange (14.51%, 6 IPOs raised $201.4m); and the Tokyo Stock Exchange (3.14%, 2 IPOs raised $43.6m).

Gil Forer concludes, "Past recessions have shown that successful companies often emerge from the toughest times. The recovery of the IPO market will require at least two to three quarters of macroeconomic stability and for confidence to be re-built. However when the markets open and valuations improve, high quality companies will be poised to take advantage."