Abu Dhabi bourse sees 40-60 IPOs in pipeline

GROWTH POTENTIAL: A change in the law has allowed family companies to sell less than 55 percent. (Getty Images)

The markets for international public offerings are largely shut worldwide, but Abu Dhabi Securities Exchange expects some 40 to 60 companies to float on the bourse in the next one to two years, its chief executive said on Tuesday.

As of Oct. 23, ADSE has 65 companies with a combined market value of 361.5 billion dirhams ($98.4 billion).

ADSE Chief Executive Tom Healy expects the number of firms on the bourse to nearly double in one or two years because of the growing economy, and as a result of upcoming new listing rules, which will allow firms to float a minimum of 30 percent, down from the current 55 percent.

"There are 200 family-owned companies that would like to go public after the change of the IPO law," said Orhan Osmansoy, chief executive of The National Investor, the Abu Dhabi-based investment bank.

Under current regulations, private businesses in the second-largest Arab economy must sell 55 percent of their stake in an IPO, while founding shareholders are compelled to hold on to shares for two years after the offering.

Many family-owned companies in Abu Dhabi remain private as they do not want to lose control of their businesses.

Abu Dhabi's Securities & Commodities Authority is revising company law to allow companies to sell a smaller portion of their share capital to encourage listings.

Healy told the Abu Dhai Investment Forum he expected IPOs to resume once the world's markets calm.

"After the market settles down, people will find the rest of the world in recession. And UAE will look even more attractive," said Healy.

Citigroup regional head for equities in the Middle East and North Africa Kaveh Samie said Abu Dhabi is going to benefit from the global financial crisis, and that will be reflected in its stock market.

"Now we have P/E (price/earnings) multiples of a single digit but companies are producing 20 percent ROE (return on equity)... investors will take more UAE equities, multiples will be higher and there will be more incentives for companies to go public," said Samie.

Healy expects Abu Dhabi economy to continue to grow 6 to 8 percent a year, saying it will come out stronger after the credit crisis runs its course. (Reuters)

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