UAE planning own IPO ‘big bang’ — but will it just fizzle out?

Judging by the apparent difficulty of finding a seat on the Thursday-evening flight from Riyadh to Dubai, it looks like all the investment bankers and other corporate advisers in the region are fighting to get in on what will be the biggest privatization plan in history.

Saudi Arabia is looking to sell off a potential $300 billion of assets under the Vision 2030 plan to transform the economy away from oil dependence, headed by the flagship initial public offering (IPO) of Saudi Aramco, valued at as much as $2 trillion.

The fact many of the bankers and advisers still prefer the sweaty commute twice a week is partly a reflection of their desire for a weekend in the more comfortable environment of Dubai, but it also underlines the emirate’s role as the regional center for finance. Dubai has achieved a status as the financial hub for the Middle East; this is being challenged by some — including the UAE capital Abu Dhabi and by Riyadh — but Dubai still has a lead.

Those investment bankers are probably also trying to keep a foot in both camps because, while the glittering prize of the Kingdom’s privatization bonanza is a big lure, there is also big business to be done in Dubai. The UAE is lining up its own IPO “big bang” which, while amounting to less than the mega billions of Saudi Arabia, would still be a significant source of fee income for the bankers.

Advisers based in the UAE are working on at least four big IPO projects that they hope will come to fruition in the next year or so, which could produce market flotations running into the tens of billions of dollars. But, while plans are advanced, they could easily be delayed or derailed by what some perceive to be a growing unease in the Middle East’s markets. All those billions could just as easily slip away.

Running through the list of potential IPOs that have either been authoritatively reported by the media, or actually acknowledged by the corporates, gives some idea of the scale of the plans being hatched in the UAE. Either one on its own would be what the experts call a “significant liquidity event;” add them together and the package could be another big boost to regional markets.

Probably top of the list in terms of size is the much-discussed plan to float Emirates Global Aluminium (EGA) on a UAE stock market, and possibly the London market too, in a deal that could value it at around $15 billion. While the company has not confirmed the IPO plans, there is much-informed discussion that it is being very actively considered and that Western banks have been mandated to do the job.

EGA is one of the jewels in the UAE’s crown, built around the core business set up in Dubai in the 1970s, which was then the first step in a plan to diversify away from oil dependency. In 2013, that Dubai business was merged with Abu Dhabi-based Emirates Aluminium in an example of the two emirates cooperating on industrial policy.

Next up is Emaar, the developer behind the tallest building in the world, Burj Khalifa. It is openly considering a plan to float its UAE real estate business on local markets. With its main group listing and its malls business already on the Dubai Financial Market, that would be a neat way to capitalize on an order book of more than $10 billion in the Emirates.

Abu Dhabi is also getting in on the act, it is said. Senaat, the conglomerate with close links to the government, is looking to revive a plan first mooted, but then rejected, three years ago to list shares on the Abu Dhabi Securities Exchange. That too could involve a billion-dollar value tag.

There are others: GEMS, the UAE-based company that is the biggest private operator of schools in the world, is mulling a plan for a regional listing and possibly a London listing too; Avivo, a UAE-based medical company, has long been pondering a $500-million IPO, possibly in London, and could pull the trigger later this year; then there is a string of smaller regional entities mentioned as possible IPO candidates on local markets.

It adds up to a program guaranteed to keep bankers occupied in Dubai for some time to come. But recently a note of caution has crept into their deliberations. All these planned share sales can be called off at any time, in light of the prevailing market conditions, and some advisers detect a deterioration of market sentiment in the region.

The oil price is stuck below $50 a barrel, the equities indices look pretty well-valued already (in the world as well as the region) and there has been a rise in geopolitical worries especially since the standoff with Qatar involving the three biggest economies in the Middle East — Saudi Arabia, the UAE and Egypt. Bankers see resolving that issue as a top priority.

The UAE’s IPO bonanza could kick off big time, or it could fizzle out like a damp firework. That is why bankers are still hedging their bets by fighting for a seat on the Riyadh flight.

• Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai