Saudi Bank to Raise $6 Billion in World's Second-Biggest IPO of Year

By Sarmad Khan, Deema Almashabi and Matthew Martin

National Commercial Bank, the largest lender in Saudi Arabia, plans to raise 22.5 billion riyals ($6 billion) from the biggest initial public offering this year after Alibaba Group Holding Ltd.
The bank will sell 500 million shares at 45 riyals apiece, according to a statement on the Saudi Stock Exchange’s website. Subscription for the IPO will take place between Oct. 19 and Nov. 2. The sale is restricted to Saudi investors, with 300 million shares allocated to individuals and the rest to the kingdom’s Public Pension Agency.
The sale will be the second-biggest of the year globally, trailing Chinese e-commerce business Alibaba’s $25 billion IPO last month and
ahead of Japan Display’s $3.1 billion March IPO, according to data compiled by Bloomberg. It will also be the largest in the Middle East, surpassing the $5 billion raised by Dubai’s DP World Ltd. in 2007, according to the data.
“This is a big deal for the Saudi market,” Mohammed Alsuwayed, a Riyadh-based financial analyst and partner at SPT Investors LLC, said late yesterday by phone. “The pricing represents good news for the Saudi public and it will reflect positively on the market’s performance in the next few weeks.”

Market Opening

NCB, as the bank is known, is the only unlisted lender among the kingdom’s 12 domestic banks. The bank said on April 9 it appointed HSBC Holdings Plc and Gulf International Bank BSC as financial advisers for the sale. The lender is offering 25 percent of its capital, valuing it at about $24 billion, according to Bloomberg calculations.
Total assets at NCB were 377 billion riyals at the end of 2013. It was also the most profitable bank in the kingdom last year, according to data compiled by Bloomberg.
“The pricing of 45 riyals per share came below expectations, as analysts expected it to be between 50 riyals and 60 riyals per share,” Mohammed al-Omran, a financial analyst and president of the Gulf Center for Financial Consultancy in Riyadh, said by phone late yesterday. “This means a big boost for the IPO and the market as the pricing represents positive news for the Saudi public.”
Saudi Arabia is preparing to open up its stock exchange valued at about $590 billion to foreign investors in the first half of next year, spurring investor interest in the nation. The Capital Market Authority in August proposed rules that would allow foreign investors to hold as much as 10 percent of the value of the Tadawul stock exchange.

Record Offerings

The country’s Alinma Bank in 2008 raised $2.8 billion when it sold shares at 10 riyals. The Islamic lender climbed 60 percent on its first day of trading.
Even without Alibaba’s (BABA) record $25 billion IPO in the U.S. last month, the three months through September were still the busiest for IPOs in four years. From German online retailer Zalando SE to WH Group Ltd., the world’s largest pork producer, companies raised $41.8 billion through Sept. 29, data compiled by Bloomberg show. In the U.S., it was the busiest third quarter in more than a decade -- also without Alibaba included.
Emaar Properties PJSC, Dubai’s only listed developer to survive the property crash without an annual loss, last month raised $1.6 billion from the IPO of its malls unit. The company said it also plans an IPO of its hotels business.