ALBA offering to raise $540m for Bahraini wealth fund

Bahrain's state-owned aluminium producer has launched an initial public offering (IPO) that is expected to raise as much as US$541 million (Dh1.98 billion) for the country's sovereign wealth fund, the company's majority owner.

Mumtalakat, the state-owned investment fund, is selling an 11.5 per cent stake in Aluminium Bahrain (ALBA), which operates the second-largest smelter in the Gulf.

The sale will reduce the fund's stake in ALBA to 67.8 per cent, with the balance of shares held by Saudi Basic Industries Corporation (SABIC).

The proceeds will fund the growth of Mumtalakat, said Talal al Zain, the fund's chief executive. Mumtalakat raised $750m this year through a bond offering but is laden with large liabilities including the country's money-losing airline, Gulf Air. "This IPO will support Mumtalakat's strategy to grow the wealth of Bahrain and drive value creation in strategic non-oil and gas-related assets, as well as helping to attract foreign direct investment into the country," Mr al Zain said.

The company will sell more than 163 million ordinary shares valued at an initial offering price of 1.25 Bahraini dinars a share over the next two weeks to institutional and retail investors.

The IPO was "an expected move" for Mumtalakat, said Ghanem Nuseibeh, a sovereign wealth fund expert and partner at the London strategy and management consultancy Cornerstone Global Associates. "With the way Bahrain's economy has been developing, particularly diversification efforts and dwindling oil income, there is little choice for Mumtalakat but to start issuing IPOs," Mr Nuseibeh said.

"The idea of a sovereign wealth fund being a partner with other shareholders is not new. This time, however, it is on a different scale."

In June Mumtalakat reported a net loss of $487.2m for last year, led by a $509m loss at Gulf Air. The fund suggested in February that it would transfer ownership of Gulf Air to the Bahraini government, but then announced this month it would inject $1bn more into the carrier. It expects the airline to be profitable by 2013.

First-half net profits at ALBA this year amounted to $200m, and Mumtalakat raised another $750m through a bond issue in June.

The IPO is envisaged as a means to diversify into more liquid investment, Mr al Zain said last week.

SABIC, which owns 20 per cent of ALBA, said last week that it would not offer its stake to the public.

cstanton@thenational.ae