Although the Gulf equity markets are correcting themselves in spectacular style, local companies are not being deterred from planning for IPOs. Emirates Holdings, one of the UAE’s biggest private sector groups, is spinning off two of its subsidiaries into a separate independent vehicle in preparation for their eventual IPO, says the firm’s chairman. They will be the first of Emirates Holdings’ subsidiaries to be spun off.
The two subsidiaries – an engineering and construction company and a foods distributor – will use the vehicles to make acquisitions to reach a sufficient size before tapping the local stock markets within the next two years.
The spin-offs will help introduce formal corporate governance procedures to the two companies. They will both create boards of directors including two non-executives, and put in place a regular reporting structure. “This would be in preparation for the IPOs,” says Hussain Al Nowais, chairman of Emirates Holdings, which would still maintain majority control of the two subsidiaries as only 40% of their shares will be placed in the market.
The engineering subsidiary, Danway, will seek three acquisitions; the other subsidiary, Federal Foods, will seek two. Both companies will then list on the Abu Dhabi Securities Market.