TNI share sale after change in law

Abu Dhabi-based investment bank The National Investor (TNI) is prepared for an initial public offering (IPO) when UAE laws change to allow it to retain majority control in the business, according its chief executive.

"When the companies law is changed and we can sell 30 per cent rather than 55 percent we will look at it," said Orhan Osmansoy, adding that the current law had stood in the way of many private firms going public.

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

The President His Highness Khalifa bin Zayed Al Nahayan, Ruler of Abu Dhabi last August approved a legal amendment allowing families to own as much as 70 per cent of their companies when they sell shares in initial public offerings. The law does not apply to private firms or family-owned businesses with more than one shareholder. "That has been a deal breaker", for many private firms, he said. "What will create a catalyst for the IPO pipeline is to tap into businesses that are owned by one or more families."

A capital increase would help "spruce up" the bank's balance sheet for asset management and private equity", Osmansoy said, adding that an IPO would give its 95 shareholders a way "to monetise on their holdings".

The investment bank is looking to tap the debt markets for as much as Dh400 million by year-end.

The National Investor, which won approval to operate in Saudi Arabia in April, would consider acquisitions to enter other markets in the Middle East.

"We are on the look out continuously… sometimes assets tend to be overpriced," he said.

The bank, which was the lead arranger on the IPO of Dubai-based interior contractor Depa Ltd, has about five mandates this year, including issues in the UAE and Oman, Osmansoy said.

TNI also commented on this week's momentous energy summit in Jeddah, with one top executive certain Saudi Arabia's ability to rein in rocketing oil prices had suffered a major blow after the largely unsuccessful meet-up of Western powers.

King Abdullah's decision to boost output by 200,000 barrels of oil a day failed to keep prices away from $140 a barrel, a repeat of last week's bounce back after the July output increased was leaked, said Gundi Royle, Managing Director of Investment Banking at TNI. "Saudi Arabia's credibility is on the floor after this meeting. There hasn't been a lot achieved, only that everyone is agreeing on the same set of problems."

"People are now agreeing with each other in the same room whereas before they were agreeing in separate rooms," she said.

Royle, who oversees TNI's fledgling energy advisory business, said the Jeddah summit highlighted that the Saudis do not wield the influence over global oil prices that they once did.

Royle said the price of oil and gas had defied the principles of supply and demand recently and had displayed a high degree of "elasticity". This she said was evident in consumers' toleration of rising costs. She said that prices could rise to $150 a barrel in 2008 but would tail off as 2009 approached.

"The next step is that the OECD downturn will eventually spread to the major oil consumers such as China and India, which will have a knock-on effect for demand for energy."

Royle said due attention was being given to current short-term price spikes but that in the oil and gas industry, where the average project length is 20 to 30 years, there was a longer view being taken.

TNI's energy operation, which was set up in February, represents 35 per cent of the firm's overall advisory contracts.


The numbers

Dh400m: The National Investor plans to tap the debt market for this amount

30%: The firm will sell this percentage of firm after the new law