x Abu Dhabi, UAETuesday 23 January 2018

Al Fahim Group eyes IPOs for banking and hotel subsidiaries

Al Fahim Group, one of Abu Dhabi's biggest family conglomerates, would consider listing some of its subsidiaries in the future.

It also owns and runs the Fairmont Bab Al Bahr, above, and Hilton hotels in Abu Dhabi. Paul Thuysbaert / Fairmont Hotels & Resorts
It also owns and runs the Fairmont Bab Al Bahr, above, and Hilton hotels in Abu Dhabi. Paul Thuysbaert / Fairmont Hotels & Resorts

Al Fahim Group, the family concern that holds concessions on brands, including cars, banking and hotels, is preparing some of its companies for public listing.

Rashed Al Fahim, the managing director for the group, says that an initial public offering (IPO) for the entire conglomerate is out of the question but that some of the separate businesses could be listed in the next few years.

"We can't list our name as a business," he said. "We have many separate interests that we are grooming for public listing, but not the group itself. I think this business should still be a family business but have a proper corporate structure."

Mr Al Fahim said that given market conditions, a listing would not be possible in the near future but that the company was working on improving its governance and putting international corporate standards in place.

"We did a lot in the last three years and we are implementing in phases," he said.

The country's two main exchanges have experienced significant losses in value since 2005, causing companies across the Emirates to shelve listing plans.

The Dubai Financial Market has declined more than 80 per cent and the Abu Dhabi Securities Exchange almost 60 per cent in the period. Both exchanges have courted family businesses to list shares and generate desperately needed trading volumes, but many businesses have been reluctant to risk such a move in volatile markets.

Al Fahim Group, founded by Abdul Jalil Al Fahim in 1958, is one of the best-known and most respected family businesses in the UAE. It has interests in sectors including vehicles, oil, hospitality, industry, property, travel and tourism.

Al Fahim represents international brands such as Mercedes-Benz, Jeep, Fiat, Michelin and Bosch. It also owns and runs the Fairmont Bab Al Bahr and Hilton hotels in Abu Dhabi and the Crowne Plaza on Sheikh Zayed Road in Dubai.

The company has a diverse spectrum of investments, including the development of the Dubai Pearl, and stakes in International Investment Bank Bahrain and Big Bus Tours International.

"We would look at listing some hospitality divisions and banking sectors. We are not specifying right now," Mr Al Fahim said. "This is for the next few years. Nothing is set in stone."

Listing a family business can be a wise move for second and third generations, which often have interested parties wanting a say in how the company is run. Paris Gallery, a Dubai luxury retailer that is owned by a family also called Al Fahim, is hoping to list next year if market conditions improve.

Mohammed Al Fahim, the retailer's chief executive, has been vocal in the past on the merits of a listing and says that up to 90 per cent of second and third-generation family companies fail when they remain family-held.

Despite this failure rate, the number of GCC-family owned companies considering listing has fallen dramatically since the financial crisis.

The situation has been exacerbated this year by continued uncertainty in the euro zone and the resultant market volatility.

The total value of IPOs in the Middle East was US$21.7 million (Dh79.7m) in the first quarter of this year, down 94.8 per cent from the $420m raised in the first quarter of last year, according to Ernst & Young.

Globally, companies cancelled or postponed $8.9 billion in IPOs in the third quarter as stocks plunged, according Bloomberg News.

"It's not a good time to be listing right now," Rashed Al Fahim said. "The experience in family business and corporate structure is new for us, but I think everything has a start, and we started our structure."

Al Fahim's board is made up of eight second-generation brothers, with Rashed the youngest in the family. Of his executive team, only one is a family member.

"In my father's lifetime, he created the structure of the group and it was pioneering at that time, and now we have to pioneer in a different way so that the third generation can take over," he said.

The conglomerate was enjoying strong revenue growth from its retail and hospitality businesses, which was offsetting some of the decline elsewhere in the business, such as in property, Mr Al Fahim said.