(DENNIS B MALLARI)   

 

The flurry last week of local public listings and announcements of future listings on Dubai’s stock markets has injected further momentum into the emirate’s bid to become a global centre of IPO activity that rivals New York and London.

 

Dubai-based interiors firm Depa and private stock company Mawarid Finance, joined Lebanon’s Future Pipes Industries to unveil plans to join the ranks on the Dubai International Financial Exchange (DIFX).

 

As local demand for IPOs continues to accelerate, a group of the region’s prominent business leaders talk exclusively to Emirates Business about how Dubai’s exchange credentials are catching the eye of global executives considering a major dual listing for their firm.

 

The heads of financial services powerhouse Dubai Group, global venture capital company Norwest Venture Partners and freshly IPO’d interior contractor Depa, explain that Dubai now firmly holds the key for global businesses craving Middle East exposure.

 

If this week’s announcements and last year’s public listing statistics are anything to go by, 2008 will be the DIFX’s busiest year ever.

 

In 2007, the total raised by IPOs in the GCC increased by 40 per cent year-on-year to $10.5 billion (Dh38.5bn), with the UAE witnessing $5.1bn. There is an expected further eight share sales here this year.

 

Depa is looking to raise $400m by listing 40 per cent of shares, Mawarid Finance is awaiting a UAE Central Bank decision on its IPO and Future Pipes Industries is set on a DIFX share sale in the next few weeks.

 

Mohannad Sweid, chief executive officer at Depa United Group, said Dubai’s international reputation is a useful ally in building the firm’s global brand and allows foreign business to break into the Middle East region.

 

He said: “Dubai is definitely a gateway into the Middle East. When we meet prospective clients and we mention we’re based in Dubai, they immediately feel Depa must be a well-structured and well-managed company and good quality.

 

“They can straight away put a profile around the company. It makes a big difference if you’re headquartered in somewhere other than Dubai in the Middle East.

 

“The way we look at ourselves is that we’re not only a local company, serving just the region, we’re global.

 

“Dual listing serves our purposes because a big part of our revenue comes from this part of the world.

 

“So DIFX is the obvious choice for that here, but our listing in London is to give us the comfort in transparency and the accessibility to international investors to come in,” Sweid added.

 

Depa will pursue a primary listing of shares on the DIFX in April, as well as listing of its global depository receipts, or GDRs, on the London Stock Exchange.

 

It is expected to be the first privately owned UAE business to list on the Dubai bourse. Promod Haque, Managing Partner at US firm Norwest Venture Partners, which invests in Dubai’s Noor Investment Group, said: “You’ll see over the next few years, this whole thing of dual listing. And you’ll see more and more companies utilising that, but the question then becomes will this become automatically a place where companies list. Does it become New York and Dubai, versus New York and London? It will vary by the kinds of services and the nature of the company.”

 

He added: “Does it become Mumbai and Dubai, versus Mumbai and New York? Not every company will go to New York and not every company will go here. So you’ll start to see many dual listings.”

 

According to Haque, Dubai has presented itself as a useful tool for companies targeting Middle Eastern customers and looking to build brand muscle.

 

“This goes especially for companies that have a lot of products and services that they’re selling into the Middle East and North Africa area. It’s advantageous for those companies to be known in that area, both financially and as a brand. Building a brand is very important but it’s also very expensive.

 

“Once you’ve built a brand you want to leverage that brand in many different ways and it’s not just in your market but it’s also among consumers that are interested in buying stock in your company, in addition to buying products,” he said.

 

Abu Dhabi-based Gulf Capital, one of the leading regional private equity firms, recently said the total number of IPOs in the GCC during the 2007-2010 period is expected to exceed 116, while the National Bank of Abu Dhabi has already announced it expects to manage at least eight this year, with three aiming to raise at least $1bn by the end of June.

 

“When you look at the capital generation going on in this part of the world, barring any disaster, increasingly people will say they want to list in the Middle East, then they’ll say where in the Middle East.

 

“It’s clearer today than it was 18 months ago that Dubai is the capital market to list in in the Middle East,” said Tom Volpe, CEO of Dubai Group.

 

“Every company in the world wants to know how to tap into Middle Eastern capital. And most companies that do a public offering, dual list,” he added.

 

Volpe said the $6.5 bn Nasdaq deal late last year ensured Dubai’s standing as the true entry point for international investors thirsty for Middle East capital through a public offering.

 

“Through Dubai Financial Group we were involved in the Nasdaq transaction, which is the seminal transaction for this region. Dubai was already well in front for being the financial centre for the Middle East and North Africa (Mena) region, but I think the NASDAQ deal catapulted it even further in front. Ten years from now, the formation of Borse Dubai from DIFX and DFM, and then the Nasdaq deal, people will look back at those as seminal events,” said Volpe.

 

Borse Dubai recently reported a 30.3 per cent stake in Nasdaq OMX Group in a regulatory filing after the highly complex takeover deal for the Nasdaq Stock Market to buy OMX, a family of Nordic exchanges.

 

As part of the deal, which the companies agreed to in late November 2007 and which was later approved by the US government, Borse Dubai sold its 97.2 per cent stake in OMX to Nasdaq Stock Markets in exchange for 2.9 million newly issued Nasdaq shares and around $1.9bn in cash.

 

Haque says Dubai’s ability to open pathways to the rest of the Middle East also extends to the booming technology sector that supports the growth of banking and financial services arena.  “Dubai is, and will continue to be, in addition to being a financial hub, a very interesting gateway to reaching the Mena market.

 

“I wouldn’t be surprised if over the next few years you see more and more technology companies setting up subsidiaries here to figure out how to reach markets in the Middle East.

 

“As Dubai becomes the gateway to a lot of Mena enterprises, you’ll find that in this Metropolis what will develop is product management skills which are extremely essential for technology firms.

 

“Engineering skills you can outsource those, but product management skills and marketers are in touch with the consumer,” said Haque.

 

Norwest Venture Partners through its investments this week helped Noor Investment Group launch an outsourcing company to capitalise on the region’s financial services boom. The joint venture with renowned Indian outsourcing firm Adventity will establish a Dh100m project to be based at the Dubai Outsourcing Zone.

 

Haque added: “Investments in technology itself in Dubai will come over a period of time. But what we’re seeing now is the application of technology.

 

“As more and more multi-national firms are getting located here and opening up branches, the telecommunications infrastructure that they need becomes very interesting indeed.”

 

 

THE LATEST IPO LISTINGS

 

Dubai-based interiors firm Depa said last week it is looking to raise up to $400 million (Dh1.47bn) in an IPO listing to help fund global expansion and acquisition plans. The company will pursue a primary listing of shares on the DIFX in April. It will also list its GDRs on the London Stock Exchange.

 

It is expected Depa will be the first fully privately owned UAE business to list on the bourse.

 

Mawarid Finance last week completed preparations for going public. The Dubai-based firm has submitted its application to the UAE Central Bank and is waiting to hear whether it will be allowed to sell its shares to the public.

 

The firm in the only fully independent finance company in the UAE – its shares were divided among 350 investors, with companies limited to a maximum holding of five per cent and individuals restricted to no more than 2.5 per cent each.

 

Lebanese firm Future Pipes Industries is set to join the ranks of the DIFX with plans to sell shares to the public in the next few weeks. The company plans to expand its operations, which already span the Middle East, Europe and US.