Saudi Arabia's Capital Market Authority (CMA) allowed Arabian Waterproofing Industries Company (Awazel) to raise funds by selling a stake in the company through an initial public offering (IPO) in the fourth quarter of this year.
The Riyadh-based CMA, which regulates the biggest bourse in the Arab world by market capitalisation, said the company will sell 8.19 million shares though the public float, which equals to 30 per cent of the firm's capital. A portion of the offered shares will be allocated to institutional investors only, CMA said in a statement on Saudi Stock Exchange (Tadawul) on Thursday.
Investors will be able to subscribe to the company's shares in the seven-day period between October 30 and November 5, once the book-building process is finished, said the statement, adding that the prospectus of the offering will be published within sufficient time ahead of subscription period.
Awazel, which has been operational in the kingdom for more than four decades, has two plants in Riyadh and Jeddah and has representative offices in Dammam, Dubai, Abu Dhabi, Kuwait, and Indonesia. Its waterproofing solutions are largely used for by the construction industry, which has started recovering from the severe headwinds sparked by the oil price slump and subsequent spending cuts by the government.
The IPO market in the Arabian Gulf region has remained sluggish on the back of the slower economic growth, with firms waiting for equity markets to pick up to get better valuations for their businesses.Nomu, a parallel trading platform introduced in the kingdom to list shares of small and medium-sized companies, has been the driver of IPO activity in the region. However, the market has not seen big-ticket deals in recent years.
Proceeds generated from regional IPOs in the second quarter of this year decreased 38 per cent from the year earlier period even though the number of listings in the three months ending in June rose, according to advisory firm PwC. Markets held three IPOs in the second quarter of 2017 compared with two in the same period a year earlier..
The only primary exchange offering in the second quarter was Jadwa Reit Al Haramain Fund, listed on Tadawul. The fund, managed by Riyadh-based Jadwa Investment, is a Shariah-compliant real estate investment traded fund, that floated 36 million shares valued at US$96 million. On Nomu, two listings raised $74.7m during the period.
Markets are expected to gather pace when Tadawul itself will go public next year, only the second exchange in the region to do so after the Dubai Financial Market. Saudi Aramco, the world's top oil producer, will also tap the equity markets next year, and may raise $100bn in the world's largest-ever IPO deal when it sells less than a five per cent stake to the public. In the UAE, Abu Dhabi's Adnoc plans to sell a stake to the public in its distribution unit, potentially the biggest transaction on local equity markets since Dubai-based port operator DP World floated shares in 2007.