Out-Law / Your Daily Need-To-Know

Dubai government companies to float on stock exchange

Out-Law News | 04 Mar 2014 | 10:08 am | 3 min. read

Some of Dubai's most valuable state-controlled companies, including its Emirates airline, could be listed on the stock exchange, according to reports.

Mohammed Al-Shaibani, the CEO of the Investment Corporation of Dubai (ICD) has said a number of its state-owned entities could become the subject of an initial public offering in Dubai. Some could also be partially floated on the London Stock Exchange.

As chief executive of the ICD, which is the Dubai government's main investment arm, Al-Shaibani is the emirate's chief finance officer.

He told the Daily Telegraph newspaper: “We have a lot of entities here [in Dubai] that can also go public and that should be a fantastic way to raise capital if we need it. We also have the option of secondary issues (including the London Stock Exchange).”

Al-Shaibani said that while he was "dead serious" about listing the Emirates airline company, a flotation was not imminent because he would prefer to grow the company before listing it on the stock exchange.

“We are dead serious," he said. "I cannot list it (Emirates) now because there is still value to be created there. We don’t want to give away value just like that. Ideally we would like to list here [Dubai] but we also have the option of a secondary listing on the London Stock Exchange, which is very strategic for us because we are the largest shareholders.”

According to the Emirates airline it is wholly owned by the Government of Dubai. It currently has a fleet of more than 200 aircraft, flying to more than 140 destinations in more than 70 countries around the world, with 1,200 Emirates flights departing Dubai each week. In the financial year 2011-2012, the airline carried 34 million passengers. The airline has 230 aircraft on order, with a combined value of $84 billion, and by 2020 aims to double its passenger numbers to 70m annually.

Al-Shaibani said that the low-cost spin-off airline Fly Dubai, and Dubai Airports, which owns and manages the operation of Dubai International and Dubai World Central-Al Maktoum airports, could all be floated in the future, in order to raise funds. Entities in other sectors, including Dubai's aluminium-smelting operations, could also be among those offered.

Listing companies on the stock exchange would be a change in strategy for Dubai, which in recent years has focused on building up state-controlled government related entities (GREs) as reliable sources of revenue. Domestic oil production in the emirate has waned in recent years, and Dubai has since placed a large emphasis on commerce, tourism and investment. It was hit by the 2009 global financial crisis, and announced that it needed to freeze $26bn of debt owed by one of its largest GREs, Dubai World.

However the economy has bounced back. The Telegraph reported last week that Dubai’s government has reached an agreement with the Abu Dhabi-based Central Bank of the United Arab Emirates to roll over a $10bn bond facility at a lower rate than the 4p% it had originally agreed to pay five years ago. And a Department of Economic Development official stated last month that it expects its economy to grow by an inflation-adjusted 4.7% this year, accelerating to more than 5% in 2015, according to Reuters news agency.

Dubai-based Sachin Kerur of the Pinsent Masons, the law firm behind Out-Law.com, said that the plan to float government entities can be viewed as a show of confidence by the Dubai government that the country's economic fortunes are on an upward trend.

"This may well be the trigger for an exponential growth in the local stock markets and more investor interest in a resurgent Dubai and United Arab Emirates economy," he said. "The suggestion of a second listing in London is interesting. It suggests the Dubai government is clearly confident enough in the brand and health of some of its trophy companies to believe that they will attract international investment. A few years ago that may have been in doubt but as Dubai has pulled out of recession, a number of Dubai companies have bounced back and would likely attract a great deal of interest on international bourses."

Following reports of Al-Shaibani's plans, Emirates president Sir Tim Clark told Al Arabiya News that he was "surprised" to hear that the airline was to be the subject of an initial public offering (IPO).

"We are under no instructions on IPOs whatsoever," Clark said. "It hasn't come up in conversation for about four or five years."

He noted that it was the decision of the airline's owners whether to list, rather than that of the airline itself.