Rubber stamped
The Middle East has become a major and consistent source of ECM activity in the wider EMEA region and competition between banks is increasing. For its ability to not only maintain reach but help open new markets and achieve the highest deal count, EFG Hermes is IFR's Middle East Equity House of the Year.
The Middle East has long been a notable source of ECM activity in EMEA, but international bank investment into the region has tended to be retraced some time later, due to a lack of consistency. However, for periods over the past couple of years ME activity has led the entire EMEA region.
IPO activity, led by Saudi Arabia and the UAE, has been exciting and successful – for issuers and investors – when in Europe new listings have lacked positivity and investors have regularly been punished for taking the risk of buying.
International banks are once again committing resources, while national champions are working to internationalise their offering.
EFG Hermes occupies what head of investment banking Mostafa Gad describes as a "sweet spot" between the research coverage and distribution of global banks and the market access of local banks given its presence across the region.
Unsurprisingly, given its broad reach, a key theme for the bank this year had been diversification both in types of deal and geography.
At the start of the year EFG reopened the Dubai market with the (Dh772.5m) US$210m listing of Al Ansari Financial Services, a deal notable as the first private sector deal of the year for the UAE, a country typically dominated by privatisations.
While private sector IPOs are expected to increase in the UAE they were already in full swing in Saudi Arabia where EFG served as global coordinator on the largest of these, the SR4.57bn (US$1.2bn) listing of drilling business ADES Holding, IFR's Middle East Equity Issue of the Year.
In addition to its size, ADES was notable for predominantly fundraising for the issuer, marking a return home having previously been listed on the London Stock Exchange and seeing investors move away from the typical focus on dividend yield and P/E towards more growth-oriented metrics.
Adnoc Logistics and Services had earlier used a mix of yield and EV/Ebitda for its IPO on which EFG was a joint bookrunner.
While much of the expansion of Middle East activity in recent years has focused on Saudi Arabia and the UAE these markets have slowed slightly compared to 2022 amid rising interest rates.
Despite this EFG has managed to maintain deal flow partly by its role in opening up wider markets.
Having in 2022 been mandated on Kuwait’s first IPO in five years, in 2023 the company has been closely involved with the evolution of Oman’s equity markets.
Following on from its involvement in the listing of the Pearl Real Estate Investment Fund in 2022, EFG was mandated on Oman’s two energy IPOs, Abraj and OQ Gas Networks.
Both attracted significant demand levels with OQGN setting a new record for the Muscat Stock Exchange with a deal size at OR297m (US$771.6m). EFG was the only bank on both offerings.
"Abraj was more of a pilot kind of IPO for them to understand what was going on," said Gad. "OQGN was the first one to come out of Oman actually accepting discretionary allocation out of the bookbuilding process and moving away from pro rata allocation. [That] was the big breakthrough on OQGN and has been successfully done. The regulator understands how it works, the framework has been approved so I think it laid a very important foundation for the upcoming pipeline.
"At the end of the day we not only concluded two successful IPOs but we developed a market for future IPOs."
According to Gad, EFG is currently in discussions with two Omani companies around 2024 listings.
As well as regional variety, diversity in size is also key and while EFG has been mandated on many of the region's biggest deals, including the Dh9.1bn IPO of Adnoc Gas, presence is maintained at both ends of the market, such as the SR1.09bn IPO of car hire business Lumi Rental led alongside Saudi Fransi.
"Anything below US$400m–$500m usually [global banks’] appetite is low so this gives us another area where there is volume," said Gad. "Whereas globals, unless there is something very important in terms of relationship, they just ignore it."
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