Buyout Firm Jadwa Sees No Fatigue in Quickening Saudi IPO Market

Jul 08, 2014 8:27 am ET

July 8 (Bloomberg) -- Jadwa Investment Co., the Saudi Arabian private-equity firm with more than $5 billion in assets, said it prefers exiting investments through initial public offerings as investor demand for share sales increases.

“We don’t have any concerns about fatigue or the market slowing down at any time soon,” Chief Executive Officer Tarek Al Sudairy said in a July 6 phone interview from Riyadh, the Saudi capital. “Initial public offerings are a good way to absorb liquidity and protect the market from overheating.”

Saudi Arabian companies raised $760 million through share sales in the six months through June, the most active first half since 2009 when $1.04 billion was raised, according to data compiled by Bloomberg. National Commercial Bank plans to sell shares before the end of the year in what will be the largest IPO in Saudi Arabia for more than 12 years, while energy producer Acwa Power also plans to list on the Tadawul exchange.

Jadwa is an investor in Saudi hospital operator Al Hammadi Company for Development & Investment, which will complete an IPO this month, Al Sudairy said. The offering is the second time this year that one of Jadwa’s investments has gone public, after it sold shares in Abdul Mohsen Al Hokair Tourism and Development Company in June.

The pipeline of companies planning to list on the Saudi Stock Exchange is growing as business owners look to benefit from the 27 percent rise in the Tadawul in the past year.

Equity Challenge

Jadwa’s private equity arm also plans to complete one acquisition and the sale of a business before year’s-end, said Al Sudairy. The acquisition, which he declined to disclose, will be Jadwa’s seventh since it was established in 2006.

The firm has invested 3 billion riyals in private equity investments, he said, while its investment banking arm advised on 2.7 billion Saudi riyals ($720 million) of mergers and acquisitions across five deals last year, he said.

Jadwa is also in talks to buy a majority stake in Gulf Union Food Co., four people familiar with the matter told Bloomberg last month. Al Sudairy declined to comment on specific transactions.

Private equity activity in Saudi Arabia is picking up as economic growth, a rising population and high consumer spending encourage more investors to look for opportunities.

“There is growing interest in private equity in Saudi Arabia from both regional and international firms and we have seen that push up valuations for certain private equity transactions,” Al Sudairy said. “The real challenge though, is the relative unfamiliarity with private equity and the hesitancy in many family businesses to bring in an external shareholder.”