The proposal to list shares in a part of Emaar Properties, taken by the board under the chairman Mohamed Alabbar, is a good idea. But it would be such a big event for the company, and for financial markets in the UAE, that it deserves careful planning and scheduling.
Initial public offerings, as is being proposed at Emaar, are complicated procedures that need minute planning and careful fine-tuning, down to the last detail.
True, it has been under consideration for some time. Mr Alabbar has long recognised that there is value locked in the company that can be freed up, to the benefit of shareholders (of which the Government of Dubai is a major one) and for the good of the local stock exchanges. But many financial professionals believe recent statements that it can be achieved before the holy month of Ramadan, starting at the end of June this year, are overambitious.
That timetable is made even more demanding by the fact that not one, but two, listings are being considered. Mr Alabbar said in a recent interview that shares in the malls and retail division of Emaar – one of the most successful parts of the business – would be floated on the Nasdaq Dubai market and on the London Stock Exchange (LSE).
A dual listing like this is even more complicated. There is only one true comparator: DP World, which is listed on both Nasdaq Dubai and LSE. But it took five years for DP World to get around to the London quote after its initial flotation in Dubai in 2007, and the pros and cons of the LSE listing are still being debated today.
Other UAE corporates have gone for a London quotation, like the two medical groups NMC and Al Noor, as well as the property developer Damac. These have been successful, judged by the performance of the shares (or global depositary receipts, a form of quasi-equity in the case of Damac). But none have attempted it in the time scale proposed by Emaar, and none have done it simultaneously with a Dubai listing.
There are a range of challenges Emaar faces. The malls and retail division is a separate unit of its empire, but it is not yet a full-fledged corporate entity ready for IPO. Shares have to be issued in the new company, a new board of directors has to be put in place, and financial records provided to the listing authorities in both Dubai and London. These are not trivial matters.
Then there is the question of which market. London or Dubai would be the primary venue for the share issue. This is complicated by the fact that Emaar already has a quotation on the Dubai Financial Market.
Although it would seem obvious that Dubai is Emaar’s primary listing, it is not really so clear-cut. After all, Damac is a Dubai institution born and bred, but in the end it went to London, and in arcane GDR form too, for other reasons.
Emaar says it wants to float the retail business to give money back to shareholders, which is a laudable ambition. But it is prevented from doing so on DFM since companies listed there cannot return money to original investors, only to the company itself. This is an archaic bit of legislation that needs to be urgently revised.
Nasdaq Dubai and London have no such hurdles. Entrepreneurial investors on both exchanges can take cash out of the business, giving them an advantage over DFM.
The final issue that has to be settled at Emaar is how much of the global business will be included in the IPO. Is it the whole of the retail and malls operation? Or is it in effect just The Dubai Mall, a hugely successful business but surely on its own not worthy of the Dh9 billion price range Mr Alabbar has put on the flotation. More clarity is need here on exactly what international investors are being asked to stump up for.
The proposed offering is the most important event in the UAE’s corporate history since the DP World listing in 2007. With hindsight, that was a misconceived and mis-priced issue that did a lot of damage to the country’s stock markets over many years, and from which they are only just recovering.
With Emaar, the management, authorities and advisers should make sure they get it right.
fkane@thenational.ae
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