ADNH Catering, a unit of Abu Dhabi National Hotels, has raised Dh864 million ($235 million) through its initial public offering, pricing its shares at the top of the indicated range amid continued investor demand for listings in the region.
The company has set the final price at Dh0.96 per share for its public float on the Abu Dhabi Securities Exchange, the company said on Wednesday.
It offered 900 million shares, or 40 per cent of its total share capital, implying a market valuation on listing of Dh2.16 billion. All shares offered for sale through the float were held by the company's parent ADNH, which also trades on the ADX.
The share sale, which ran from October 7 to October 14 for UAE retail investors and eligible employees, and on October 15 for professional investors, was multiple times oversubscribed, with “substantial demand from both international and regional investors”, the company said.
ADNH Catering shares are expected to start trading on the Abu Dhabi bourse’s main index on October 23, subject to final regulatory approvals.
“The strong investor demand we have received for our IPO … reflects the confidence that investors have in ADNH Catering’s investment proposition, strategy and trajectory,” said Clive Cowley, chief executive of ADNH Catering.
The competition of the IPO is “another important milestone” for the company, which will continue to expand operations to achieve its long-term objective of sustainable growth and creating value for all stakeholders, he said.
“We remain firmly committed to capitalising on new opportunities in the UAE and Saudi Arabia, while maintaining our focus on … innovation in the catering and support services sector,” Mr Cowley added.
ADNH Catering is the latest company seeking to capitalise on the IPO boom in the UAE driven by growing investor demand amid strong economic growth.
It follows the listing of NMDC Energy, a unit of Abu Dhabi contractor National Marine Dredging Company, which began trading on the ADX in September after closing the biggest IPO in the Emirates this year.
The float, which was oversubscribed by more than 31 times, raised Dh3.22 billion through the sale of 23 per cent of the company's total share capital.
ADNH Catering offers services including food preparation as well as general cleaning, housekeeping, pest control and procurement in the UAE and Saudi Arabia. It operates across the health care, business and industry, defence, correctional and education sectors and has approximately 160 on-site kitchens that serve more than 260 clients through 350 contracts. It delivers more than 11 million meals a month.
The company, which currently operates in Saudi Arabia through a joint venture with Compass Group and Al Rushaid Petroleum Investment Company, plans to expand its business in the kingdom by about 10 per cent annually, Mr Cowley told The National earlier this month.
ADNH Catering controls 30 per cent of the joint venture and is in talks with Saudi partners to increase its equity holding in the company.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
