Abu Dhabi’s Gulf Capital happy to wait for better times to launch IPO

Karim El Solh, Gulf Capital’s chief executive, does not think that 'the IPO window is open' now. Lee Hoagland / The National

Gulf Capital, the Abu Dhabi-based private equity firm, is still on track to sell shares in its company in an IPO despite the oil-driven declines in local stock markets, but it is no longer the priority that it was before the crash in crude prices.

Karim El Solh, Gulf Capital's chief executive, said that he was looking at a time horizon of 12 to 18 months, when he expects oil prices to have recovered and financial markets to have stabilised. The company is still planning to list between 30 and 40 per cent of its shares on the Abu Dhabi stock exchange, he said.

In the meantime, the firm is focusing on investing in new companies and exiting ones that have matured, he said.

“The next 18 months, we will focus on investing in our companies,” Mr El Solh said. “Capital markets now are not very exciting. I don’t think the IPO window is open, so we are keeping our head low and keep on building value, and when the window opens we’re ready. At some point, oil will come back and markets will come back.”

Financial markets in the Arabian Gulf region have been hit in the past year by the collapse in crude prices. Since mid-2014, the price of oil has lost more than half of its value amid a drop in demand as global economic growth slows and production increases. As a result, the pipeline for IPOs has gone more or less dry as investors show less appetite for stocks, and equity index measures across the region take a breather following a bull run last year.

Despite the drop in the price of hydrocarbons, Mr El Solh said he was still bullish about the UAE because the economy has diversified sufficiently to not be overly reliant on oil. He said the company still had plenty of dry powder, the term private equity firms use to describe money they have at their disposal for investment. The firm, he said, had not used very much of the US$750 million it raised from investors last year for a fund, and that it would still be a couple of years before the company needs to raise fresh capital.

“We are processing two transactions at the moment,” he said. “We have a lot of dry powder and we are being very opportunistic in this downturn. We think we are going to find more attractive companies and be able to acquire control of them at lower prices. This vintage could be very interesting.”

Gulf Capital is also preparing to divest holdings in other companies it invested in through an older $533m fund. Stakes in those companies may not necessarily be sold in initial public offerings but to other private buyers, he said.

“We get approached all the time by either trade buyers or other financial sponsors looking to buy some of our portfolio companies,” he said. “So we will be announcing some exits in the next 18 months.

“We are not relying on just one exit route. We can do sales to other buyout firms, capitalisations where we borrow and give ourselves exits.”

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