This is the second greenfield IPO in the UAE in recent months, as investors find ways to go around federal market regulations that offer only “capital increase” when it comes to public offerings.
DSI chief executive among founders of company planning Dh750m IPO
The chief of Drake & Scull International (DSI) is among the founders of a new facilities management company that plans to raise as much as Dh750 million from an initial public offering in Dubai.
Khaldoun Tabari, the DSI chief executive, is a founding shareholder of EFS Facilities Management Services.
The public share sale would be similar to last month’s Marka – a greenfield investment in which the company is not in operation mode nor has a track record, but a holding company is created to raise cash towards an idea and high-profile backers.
Mr Tabari confirmed to The National that he was a founding shareholder in the planned IPO but declined to comment further. The listing is planned for the Dubai Financial Market.
Once listed, the holding company would acquire existing facilities management businesses in the UAE, including EFS Facilities Management Services.
According to sources familiar with the information, the IPO will raise a total of Dh750m, of which Dh337.5m will be put up by the founding shareholders and the remaining Dh412.7m will be sold to the public. The Dubai-based investment bank Shuaa Capital is advising on the deal, according to people familiar with the deal. Shuaa was unavailable for comment.
Facilities management involves looking after a building and can include anything from basic cleaning to organising complicated maintenance on elevators.
Finding a good facilities management company can often be a headache for small and medium-sized commercial and residential landlords in the UAE. During the downturn many large property developers set up their own facilities management operations in an attempt to provide the much-needed but low margin work for themselves but also as an alternative source of revenue. However, significant scale is required for such operations to make financial sense in-house.
This is the second greenfield IPO in the UAE in recent months, as investors find ways to go around federal market regulations that offer only “capital increase” when it comes to public offerings, hence not allowing founding shareholders to cash out their investment.
A flurry of IPOs is being planned as investors take advantage of higher valuations in the secondary market.
Last week, Marka said its IPO was 36.5 times oversubscribed, raising Dh10.35 billion. The company is in the process of notifying shareholders their allocations.
On Monday, Mohammad Al Dandashi, the head of Abu Dhabi’s Al Ramz Securities said that the stock brokerage’s board was considering an IPO by the first quarter of next year as due diligence and valuation surveys get under way.
Emaar Properties is planning to hive off its shopping malls and retail business in an Dh8bn to Dh9bn public share offer in June.
Candidates in the IPO pipeline are “aiming or fighting before Emaar comes into the market in June, because once it comes into the market it will be difficult for them to exit”, said Mohammed Ali Yasin, the managing director at National Bank of Abu Dhabi’s brokerage arm.
“They must do it in June otherwise you have Ramadan and summer [or they] will lose momentum if they wait too long,” said Sebastien Henin, the head of asset management at The National Investor, an Abu Dhabi-based investment bank. “They won’t take risk to wait [out] the summer and do it in September, it could be another story especially with the MSCI inclusion.”
Shares listed on the country’s national stock exchanges are due for inclusion into MSCI’s Emerging Markets Index next month. MSCI, whose stock indexes are tracked by investors with about $7 trillion in assets, upgraded the UAE from its previous frontier markets designation last June.
* with additional reporting by Lucy Barnard
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