Kanoo Group open to unit IPO and divestment of assets

The family group is undergoing organisational transformation after appointing CEO, CFO and other senior executives

Individual units are open to IPOs as long as the situation is right for that unit, said Mishal Kanoo. Victor Besa / The National

The Kanoo Group, one of the UAE’s largest family conglomerates, may sell shares in some of its units in the future, its chairman said.

Mishal Kanoo told The National the company was sifting through its assets with a potential eye for divestments. He has, however, ruled out a share floatation of the parent company.

"For individual units we are open [to initial public offerings] as long as the situation is right for that unit," Mr Kanoo said. It was too early to say which units could be sold to the public, as it is unlikely to happen in the immediate future, he said. An assessment of assets may lead to divestments this year.

The group, whose business interests range from oil and gas to travel and tourism, may also make acquisitions or expand existing businesses.

“Over time we have ended up gathering a lot of good assets,” Mr Kanoo said. “The problem is there might be assets we are not utilising or not properly utilising. We are trying to move to a more professional set up.”

The company, which has more than 120 joint ventures, is also open to acquisitions.

"The unit Kanoo Capital's mandate is to first look over all of our past acquisitions, either direct or through joint ventures, sift through what areas they think are sweet spot for them and once that is recognised, then to look at acquisitions based on certain financial criteria," he said. "The place to start would be the region."

Kanoo’s organisational transformation is progressing well, said Mr Kanoo, with the appointment of a chief executive, a chief financial officer and the head of investments in the past few years to steer the family business into the future.

The Kanoo Group, which started in Bahrain in 1890 as a coal and wood trade business, is going through its assets as part of the organisational overhaul to decide what to keep, what to sell and what to beef up, said Mr Kanoo. Divestments were “very likely this year”, but any decision had to be approved by the company’s investment committee, he said.

The group currently operates in Saudi Arabia – its biggest market which accounts for more than half of its revenue – the UAE, Qatar, Oman, India, Egypt, UK and France.

Through its joint ventures and units, it also has indirect presence across continents. In terms of debt plans, the group could also be open to be rated and issuing bonds, but for now it is happy to utilise its own funds or tap banks for fundraising, he said.

 "We haven't had a need so far [to issue bonds]," he said. "Again, two to three years down the road, with a more professional management kicking in and looking to do certain expansions, it is possible, but at the present time, no."

The IPO market in the region has picked up momentum in the past year after a lull on the back of a three-year oil price slump.

More mega sales are slated to take place in 2018, that could encourage family enterprises such as Kanoo Group to raise funds through equity capital markets. 

Family companies in the region such as Kanoo, are undergoing structural changes as they adapt to family succession, economic headwinds and new levies, such as the 5 per cent VAT that was introduced in the UAE and Saudi Arabia in January this year.

Saudi Arabia is planning to sell a 5 per cent stake in Saudi Aramco, the world's biggest oil producer. The sale, which is billed to be the biggest global IPO, could fetch as much as $100 billion, Saudi officials have said. The kingdom also plans to sell shares on the Tadawul, the region's biggest stock exchange with a market capitalisation of almost $500bn.

In the UAE, state-owned Abu Dhabi National Oil Company floated its fuel distribution unit last year and has said it could potentially sell other units in future.