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special report LONDON-LISTED MENA FIRMS

Equity in the City
As global markets stage a recovery, finance chiefs of MENA firms are adopting
the London Stock Exchange as their preferred destination for equity financing
l By Gaurav Sharma in Abu Dhabi

T

Courtesy: London Stock Exchange Group

he City of London has always
held a certain lure for finance
chiefs of all stripes when it
comes to equity financing. Tried and
tested routes for raising equity through
ordinary shares or global depositary
receipts (GDRs) open up via the
London Stock Exchange (LSE).
However, of late, companies hailing
from one particular region – Middle
East and North Africa (MENA) – are
testing what the London market has
to offer in ever-increasing numbers.
In June this year, Al Noor Hospitals
Group – one of the UAE’s leading
healthcare providers – became the 41st
MENA company to list in London.

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www.cfoworld.co.uk September 2013

Since the IPO followed an earlier one
by its nearest domestic and regional
rival NMC Healthcare, it flagged up a
quirky fact for City analysts – both of
the UAE’s leading healthcare firms can
call themselves ‘London-listed’.
They are part of a growing club.
Aggregated market data suggests the
total market capitalisation of the 41
stood at £28 billion, using the end of
the second quarter as a cut-off point.
The last 10 years alone have seen
MENA companies raise £5.4 billion in
London and the figure is tipped to rise,
says Ibukun Adebayo, head of primary
markets, Middle East & Africa at the
LSE Group.

“MENA firms with a compelling
business case get access to the best
possible mix of long-term and shortterm investors from pension funds and
insurance funds who back longer-term
stories, to intraday liquidity providers
in the shape of hedge funds.”
LSE’s Alternative investment Market
(AiM) and the main market offer
choices and listing standards with good
opportunities for MENA businesses
wanting to access capital for growth.
Pramod Balakrishnan, CFO of Al
Noor, agrees. “Our financial advisers
to the IPO [Rothschild] and investment
banks advising us [Goldman Sachs,
Deutsche Bank and HSBC] were all

Will 2013-14 be
a good year to
raise capital?

Yes: 78%

No: 7%

Jury still out: 15%

Have global
equity markets
turned a corner?

Yes: 67%

No: 15%

Jury still out: 18%

Source: CFO World
(Opinion of 27 MENA region finance directors, CFOs, partners of legal and advisory firms was sought between 21-29 August, 2013)

London offers MENA
companies the best
possible mix of longterm and short-term
investors – from
pension funds to
hedge funds
Ibukun Adebayo, head of primary
markets, Middle East & Africa,
London Stock Exchange Group

united in their belief that London was
the ideal listing location for us.”
Atop improved liquidity and profile,
Balakrishnan believes London offers
access to a range of investors who have
a deep understanding of the healthcare
sector. “Additionally, the success of
our business depends on the calibre
of the healthcare professionals we can
attract and retain. So we also felt that
a London listing would help us draw
international talent.”
While Al Noor has an ordinary
shares listing, 25 MENA companies
have opted to list in London via GDRs.
Adebayo says the appeal of a London
GDR listing is that MENA CFOs
can come to London with existing
listing standards from their respective
operating jurisdictions.
“While the bar has been set slightly
higher, and there is additional scrutiny,
eligibility criteria to be met – ultimately
MENA companies are following their
local regulations,” he explains.
While Luxembourg and Frankfurt
also have GDR programmes, London’s
has continually found favour with
MENA companies since the 1990s (see
map overleaf). Financial institutions
ranging from BMCE Bank in Morocco

Atop improved
liquidity and profile,
we also felt that
a London listing
would help us draw
international talent
Pramod Balakrishnan, CFO, Al Noor
Hospitals Group
to Bank Muscat in Oman have found it
particularly attractive.
According to T. Ganesh, CFO of
Bank Muscat, the bank opted for the
Luxembourg Stock Exchange for debt
with its initial Euro Medium Term
bonds in 2004. However, when it came
to raising equity via a GDR programme
in 2005, Ganesh says there was nothing
to beat the LSE.
“The LSE met five of our key
ambitions – diversify Bank Muscat’s
shareholding, place an Omani firm’s
credentials on a global stock exchange
[and get visibility from it], improve
value creation for our shareholders by
bringing in foreign investment, have
a larger reach in terms of fundraising,
with similar disclosure requirements
and governance parameters.”
Given that Bank Muscat was the first
corporate in Oman to list a GDR on the
LSE, it set a precedence for a regulatory

September 2013 www.cfoworld.co.uk

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special report LONDON-LISTED MENA FIRMS

framework in Oman. Regulators
supported the issuance, appreciated the
value creation proposition via a London
GDR and praised the bank for building
Oman’s profile.
“Investors in London [while we were
on our roadshow back in 2004-05],
were also surprised by the level of
disclosure, transparency and regulatory
controls protecting the banking sector
in Oman,” Ganesh reminisces.
The LSE also views its MENA
connections via a holistic prism. It’s
about complementing the regional
exchanges along their march to
maturity, rather than supplementing
them or taking business away from
them, says Adebayo.
“We see ourselves as partners in
progress. MSCI – a global provider
of investment decision support tools
– recently gave UAE and Qatar an
emerging market status. But the FTSE
upgraded both almost a year ago;
this reflects our understanding of the
region which is not limited to the Gulf

REGIONAL trailblazers: First MENA movers to the London

Algeria
Company: Gulf Keystone (AiM shares)
Sector: Oil & Gas
Date of listing: 8 September, 2004
Finance contact: Ewen Ainsworth, FD
London market cap*: £1.84bn

Tunisia
Company: BIAT (Depositary Receipts)
Sector: Banking
Date of listing: 18 February, 1998
Finance contact: Slaheddine Ladjimi, MD

algeria

tunisia

Morocco
Lebanon

Morocco
Company: BMCE Bank (Depositary Receipts)
Sector: Banking
Date of listing: 10 April, 1996
Finance contact: Othman Benjelloun, chairman

Company: Circle Oil (AiM shares)
Sector: Oil & Gas
Date of listing: 18 October, 2004
Finance contact: Brendan McMorrow, CFO
London market cap*: £115.49mn

Company: Solidere
(Depositary Receipts)
Sector: Real Estate
Date of listing: 4 December, 1996
Finance contact: Nasser Chammaa,
chairman
London market cap*: £71.44mn

Egypt
Company: Commercial International Bank
(Depositary Receipts)
Sector: Banking
Date of listing: 31 July, 1996
Finance contact: Hisham Ezz Al-Arab, chairman
London market cap*: £28.14mn
Company: Centamin (Ordinary shares)
Sector: Mining
Date of listing: 6 November, 2009**
Finance contact: Pierre Louw, CFO
London market cap*: £487.17mn

*Market cap, where available, recorded on September 13, 2013
**Date of transfer from AiM to main market
Sources: CFO World, corporate financial statements, Reuters and London Stock Exchange

We wanted to place
an Omani firm’s
credentials on a global
stock exchange and
get visibility from it
T. Ganesh, CFO, Bank Muscat

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www.cfoworld.co.uk September 2013

Cooperation Council (GCC). For
example, the LSE supports the Egyptian
Exchange (EGX) via a number of
agreements from trading technology to
monitoring mechanisms.”
“We were instrumental in the
reaffirmation of prices on the EGX
after the revolution in 2011 when the
market had shut down. There was no
reference point for any investor, except
for the one provided by the 12 LSElisted GDRs,” he adds.
GDRs may have been the entry point
when MENA firms initially made their
way to the LSE. However, share floats,

via the main market or the AiM, are
now emerging as the way forward as
regional markets mature.
Adnan Fazli, director of transaction
& restructuring services at Deloitte
(Middle East), believes there are
several firms with great potential and
aspirations of a London listing. “Given
that several regional macroeconomic
benchmarks are seen outperforming
Europe and North America, these
companies carry an attraction for
investors in London [and by default the
west]; a fact that’s not lost on CFOs of
London IPO aspirants in the region.”

Market (DepositAry Receipts and Ordinary Shares)
Iraq
Company: Petrel Resources (AiM shares)
Sector: Oil & Gas

Kuwait

Date of listing: 18 August, 2000

Company: Global Investment
House (Depositary Receipts)
Sector: Investment
Date of listing: 6 November, 2008
Finance contact: Sunny Bhatia, CFO

Finance contact: David Horgan, MD
London market cap*: £16.02mn

lebanon

iran

iraq

Company: Arab Insurance Group
(Depositary Receipts)
Sector: Reinsurance
Date of listing: 3 December, 1997
Finance contact: Yassir Albaharna, CEO

jordan
kuwait

egypt

Bahrain

saudi
arabia

UAE

bahrain
qatar

Company: DEPA (Depositary Receipts)
Sector: Retail
Date of listing: 23 April, 2008
Finance contact: Umar Saleem, CFO
London market cap*: £19.42mn

uae

Jordan
Company: Arab Potash (Depositary Receipts)
Sector: Industrial Minerals
Date of listing: 15 December, 1997
Finance contact: Jamal A.M. Al-Sarayrah, chairman

Company: Lamprell (Ordinary shares)
Sector: Oil & Gas
Date of listing: 6 November, 2008
Finance contact: Frank Nelson, CFO
London market cap*: £364.65mn

Oman

Company: Hikma Pharmaceuticals (Ordinary Shares)
Sector: Pharmaceuticals
Date of listing: 4 November, 2005
Finance contact: Said Darwazah, CEO
London market cap*: £2.02bn

oman

Company: BankMuscat
(Depositary Receipts)
Sector: Banking
Date of listing: 5 October, 2005
Finance contact: T Ganesh, CFO
London market cap*: £27.70mn

Borys Dackiw, managing partner,
Baker & McKenzie Habib Al Mulla

Qatar
Company: Ooredoo
(Depositary Receipts)
Sector: Telecommunications
Date of listing: 19 July, 1999
Finance contact: Ajay Bahri, CFO
Company: Qatar Investment Fund (Ordinary Shares)
Sector: Investment
Date of listing: 13 May, 2011**
Finance contact: Nicholas Wilson, chairman
London market cap*: £148.91mn

Copyright © CFO World, September 2013

As the ‘shocks’ and ‘scares’ of
2008-09 gradually turn into stocks
and shares worth investing in 201314, Fazli reckons NMC and Al
Noor’s London IPOs were regional
trailblazers. “Both UAE healthcare
firms are examples of ‘potential’
turning ‘real’. They’ll also sit
comfortably with overseas investors, as
the healthcare sector, given the regional
dynamic, is perceived as being resilient
to recessionary impact.”
As regional firms wise up to the
promise of overseas listings, there is the
issue of family ownership to deal with,

Change in governance
standards is palpable,
helped by Capital
Market Authorities
moving things in the
right direction

says Borys Dackiw, managing partner
of Baker & McKenzie Habib Al Mulla.
“Several companies harbouring
London IPO aspirations are family
owned where, hypothetically speaking,
you could have the patriarch as
chairman, CFO and MD rolled into
one. This will not wash if heading to
the LSE is an objective,” he adds.
Additionally, Zahi Younes, a Baker
& McKenzie partner specialising in
regional securities and capital markets,
notes that initial client meetings often
end up with him having to explain
the depth of corporate governance

rules necessary to behave as a public
company to IPO aspirants.
“The legal advisers are the first ones
on the table homing in the message
that the role of chairman [which needs
to be an independent, non-executive]
and chief executive needs to be split.
Whether you are LSE-listed or Bahrainlisted, you have to prepare for evolving
corporate governance scenarios,”
Younes says.
Dackiw adds that MENA firms
also need to get used to the idea of
management committees, lead by the
audit committee. “However, change
is palpable, helped by local Capital
Market Authorities (CMAs) moving
things in the right direction; and the
timing is perfect.”
A CFO World spot poll of MENA
market experts (see graph, previous
page) found the majority opining that
equity markets have turned a corner.

September 2013 www.cfoworld.co.uk

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special report LONDON-LISTED MENA FIRMS

An even higher number feel 2013-14
would be a good year to raise capital.
The prestige of a London IPO might
also convert a few.
“There is reputational positivity
associated with being quoted on a
specific list in London, for example, via
the FTSE indices (FTSE 100, FTSE 250
etc). However, with a GDR you don’t
get a ranking. It might be an easier
form of raising finance, but it’s not the
full works,” says Fazli.
Additionally, the Deloitte man says
that aspirants may not look towards
Asian markets. “I don’t think that they
compare with the breadth of investors
that London offers. Couple that with
familiarity, geographical proximity
(in relative terms) and historical
connections with the City – and you
complete the picture that attracts
MENA firms to London.”
Being geopolitically pragmatic,
regional analysts say London IPOs
are more likely to come from GCC
companies over the medium term, with

There is reputational
positivity associated
with being quoted on
a specific list in London
Adnan Fazli, director, transaction &
restructuring services, Middle East,
Deloitte

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UAE and Qatar leading the way, rather
than their North African counterparts.
“Tensions from Libya to Egypt
would probably cool enthusiasm in
North Africa for fear of going down
an IPO route and risking a lower
valuation. While the LSE’s initial
connection with the region started with
North Africa, we could be looking at a
temporary lull in activity from there,”
says Dackiw.
Saudi Arabia is one country that’ll
remain missing too, adds Younes.
“There remain impediments to
foreign majority ownership of Saudi
companies. While there is no express
ban on a dual listing, a Saudi CFO
won’t be ringing the bell at the LSE
anytime soon.”
“The reason why the country’s CMA
has not issued any guidelines in this
connection is because Riyadh still needs
to address the internal investment
dynamic and prevent inflated
valuations of domestically listed firms.”
The regional risk sentiment also
affects those already there. CFOs
Balakrishnan and Ganesh see the
presence of Al Noor and Bank Muscat
as a proxy for the UAE and Oman
respectively. For Balakrishnan, Al
Noor’s IPO heartened his belief about
investor confidence in the future of the
UAE and the wider GCC.
Ganesh remarks: “When things are
going well, there is good attraction
and share price moves up. When
unfavourable developments occur in
the region, which may not even be
related to Oman, foreign investors
move out. Post-GDR, this trend has
impacted our share price movement.
However, it was a risk worth taking to
diversify our pool of investors.”
Away from jurisdictions, analysts
believe retail, real estate, infrastructure
and oilfield services (OFS) firms are
more likely to opt for a London IPO
going forward. Names like Kentz,
Petrofac and Lamprell all had IPO
origins in MENA, but have gone
beyond the region, helped by exposure

Whether you are LSElisted or Bahrain-listed,
you have to prepare
for evolving corporate
governance scenarios
Zahi Younes, partner, Baker &
McKenzie Habib Al Mulla
to London. Additionally, Adebayo
reckons the media sector should be
on the list too. “We are noticing that
there are entities within the GCC, for
example in Kuwait, where the pay-TV
model is gaining traction and they
could contemplate a London IPO.”
The thinking of private equity-owned
businesses could also influence what
type of companies end up in London,
adds Fazli. “If a company is at a stage
where the regional PE investor wants
an exit; it’s natural to look at equity
markets abroad. You might get a better
valuation and the biggest bang for your
buck with an overseas listing.”
Evidence suggests the LSE is likely
to be the default destination for that
overseas listing. It seems the idea of a
London-listed MENA CFO would not
sound quite as quirky in the future; and
for some it already doesn’t. ■
With additional reporting from
Muscat and London