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Saudi Arabia: Sadafco issue opens new market

Attention now turns to more complex Al Marai transaction

The Saudi Arabian equity market has taken a significant step towards maturity with the successful launch of the first underwritten IPO in the kingdom. The SR507 million ($135 million) issue for 30% of dairy company Sadafco, which was more than 6.5 times oversubscribed, is also the kingdom's first corporate flotation since the capital market listing regulations were announced earlier this year.

"It has broken new ground because it was the first equity offering to be distributed to both retail and institutional investors through a bidding and book building process," says Oscar Silva, head of corporate and structured finance at the lead manager, Jeddah's National Commercial Bank. The bank has taken the full underwriting on its own books.

The deal could herald a series of underwritten issues, with the $500 million to $600 million offering for another dairy company, Al Marai, lead managed by HSBC,  expected in the next few weeks.

"We also have four more deals in the pipeline," says Timothy Gray, HSBC's managing director and head of investment banking for Saudi Arabia.

Underwriting is a new development for the Saudi Arabian Stock Exchange, which is by far the largest market in the region.

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