A Dubai property developer managed to pull off the Middle East’s largest initial share offering this year, but only after it was almost derailed by the sweeping arrests in neighbouring Saudi Arabia, where authorities say they’re rooting out corruption.
Advisers to Emaar Properties scrambled to complete a $1.3bn share offering in its UAE development business after local investors reneged on hundreds of millions of dollars in demand on the last day of the sale, according to people familiar with the matter. The retreat was triggered by Saudi Arabia’s unexpected crackdown, they said.
In the end, Emaar Development was able to pull off the listing within the original price range, with backing from some prominent regional investors and global funds, making it the largest deal in the Middle East this year. The top 10 buyers accounted for about 50% of the sale, and funds linked to the Abu Dhabi royal family also invested in the sale, two of the people said.
The government of Dubai is the largest shareholder in parent Emaar Properties.
“We are pleased to have received significant retail and institutional support for our IPO, the first in Dubai in three years,” a spokesperson for Emaar Development said in an emailed response to questions. “Subscriptions to our IPO indicate that investors are excited about the prospects of Emaar Development, particularly our increased sales and performance, and our expected dividend yield of 8.6% for the next three years, which is higher than our competitors, and likely to increase in the future.”
The unprecedented Saudi crackdown this month has seen prominent royal family members and billionaire investors detained. The shock-waves wiped almost $19bn of value from exchanges across the six-member Gulf Cooperation Council countries.
There was demand for Emaar shares at the start of the IPO, which opened on October 26, more than a week before the surprise Saudi move. The struggle to complete the sale shows how regional investors are getting increasingly worried about deploying capital in the region amid the crackdown. It could also impact other large IPOs in the UAE, including the sale of shares in Abu Dhabi National Oil Co’s retail fuel stations planned for later this year and the potential IPO of Emirates Global Aluminium in early 2018.
“The timing it is not great for IPOs to fly,” said Talal Touqan, head of research at Al Ramz Capital. “Being priced at the lower range was somehow expected by the market. It could have been priced at a higher level in the past, but you had a geopolitical scenario shifting in the middle of the operation.”
Shares of parent Emaar Properties have fallen 6.8% since the IPO began. They’d previously enjoyed a surge after the plan to list the unit was announced in June. The shares dropped 1.2% yesterday to close at 7.77 dirhams.
Saudi Arabian investors that had expressed interest in large orders for Emaar Development at the start of the IPO process backed out after the crackdown, the people said. That affected appetite in the UAE as well, and investment banks managing the sale spent the last day calling around investors to assuage their fears, they said. Page 2
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