x Abu Dhabi, UAESaturday 22 July 2017

Taking a tentative step out of the comfort zone

Aluminium Bahrain's imminent floation marks a big step forward for Bahrain as it diversifies away from energy dependency.

Aluminium Bahrain's (Alba) imminent flotation marks a big step forward by Bahrain in its policy of diversification away from energy dependency, and will give an early indication of the strength of recovery in Gulf stock markets.

The company is the largest industrial business in the country and an important source of local employment, with 87 per cent of its workforce Bahraini citizens.

It is currently owned 78 per cent by Mumtalakat, the Bahrain sovereign wealth fund, with the balance held by the conglomerate Saudi Basic Industries Corporation (SABIC). Only Mumtalakat is selling shares in the forthcoming initial public offering (IPO), which will float a maximum of 11.5 per cent of Alba.

Mumtalakat is looking to raise about US$540 million (Dh1.98 billion) from the IPO, which will take place on the Bahrain Stock Exchange and with global depository receipts (a type of international equity derivative) listed on the London Stock Exchange.

"We have had strong interest from the Gulf, now we are heading to Europe to market the shares there. We expect significant investor interest from Asia as well," said Talal al Zain, the chief executive of Mumtalakat.

Alba is the fourth-largest aluminium producer in the world and the second largest in the Middle East, after Dubai Aluminium Company. Last year it suffered a loss of $221m, which Mr al Zain explained was because of restructuring charges, accounting changes and lower aluminium prices. It made $200m in the first half of the current year.

Some 163 million shares are being sold in the IPO, split between retail investors in Bahrain, who could get up to a quarter of the shares, and institutional investors around the world. The retail offer begins next week and closes on November 4, alongside an international book-building exercise for the institutional offering. Trading is expected to begin on November 4.

The flotation marks an important test for Gulf IPO markets after two years of inactivity. It is the biggest listing so far, ahead of the float by Axiom in the UAE, which is expected to raise about $100m.