SHARJAH, 2 January 2005 — Prompted by growing awareness of the imperatives of the changing times, family businesses in the Gulf Cooperation Council (GCC) member states are gradually opting to go public, taking advantage of investor response and the frenzy for stocks.

The trend was visible in the last several meetings of the heads of family businesses in the GCC. It was particularly observed during the closed-door meetings that opening up monopolies and going public was vital in order to modernize and adopt advanced business methods and technology and face the challenges of changed times, according to participants. Despite the awareness that grew since the mid-90s, many families have been reluctant to public, but the imperatives brought out by globalization and the World Trade Organization (WTO) have been pressuring them into seriously considering the switch, regional experts say.

The head of a major Saudi family business group, who prefers anonymity, said in Dubai last month that he had been in close touch with his peers elsewhere in Saudi Arabia and in other GCC countries and found that younger members of the family were more inclined to open up the business for public subscription.

“While I am not at liberty to disclose names, I could say with confidence that a majority of family businesses are on their way going public,” said the businessman.

“What needs to noted here is that it would be like opening up a dam,” he added. “The number of family businesses inviting non-family partners would grow rapidly once a few family groups set a successful example.” Lama Abou Ghali, senior capital markets analyst, Zawya.com, was quoted in the UAE press as saying this week: “There are some family businesses across the region that are seriously considering going public.

Given the liquidity and the buoyancy in the markets, this is a good time for family businesses to go public.” “We are aware of similar moves in Bahrain and Saudi Arabia but details are not known at this stage,” Abou Ghali said in a report carried by Dubai’s Gulf News.

Among the family business groups which have already indicated their desire to go public in the UAE are the Dubai-based Damas Jewelry - which has already announced its $300 million IPO and the Al-Habtoor Group as well as the Abu Dhabi-based Al-Fahim Group.

According to banking executives in the UAE, several family run businesses in Oman and Bahrain that have appointed consultations for the transformation, but the process is taking time. Caution over diminished control over the situation brought about by advanced business methods and technologies - particularly on the part of elder members of the family business groups - as well as fear of loss of majority control are deemed to be some of the factors behind the slow pace.

“There are many issues involved, especially concerning the percentage of shares to be owned by the company and the family members,” Abou Ghali observed. “It is not easy for families to give up control of their businesses because it would also mean accountability to shareholders,” said the analyst, adding: “The legal structure and other frameworks are not very clear in such conversions. However, the response to the Damas IPO may inspire others.”