Dubai : Initial public offering (IPO) activity in the Middle East has jumped five-fold to $420.5 million (Dh1.544 billion) from six IPOs in the first quarter of 2010, according to a latest report.

Regional IPOs in the first quarter of this year raised $420.5 million from six IPOs compared to $83.6 million in the same period last year, according to Ernst & Young's Middle East first quarter 2010 IPO update.

Five IPOs in Saudi Arabia and one in Qatar made up the geographical composition of the regional IPO market for the first quarter of 2010.

Mazaya Qatar Real Estate Development Company with an offer size of $144.2 million was the Middle East's largest IPO, followed by Saudi Arabia's Herfy Food Services ($110.2 million) and Alsorayai Trading Industrial Group ($64.8 million).

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Solidarity Saudi Takaful, Amana for Cooperative Insurance and Wataniya Cooperative Insurance were the other three with offer sizes of $59.2 million, $34.1 million and $8 million respectively. Saudi Arabia also led the IPO tally in the previous quarter — three out of the five Middle East IPOs were in the kingdom.

Phil Gandier, head of Transaction Advisory Services for Ernst & Young Middle East, said: "The trend mirrors the performance of the global IPO markets in the first quarter of 2010.

"The regional upturn in number and size was largely based on the performance of the Saudi and Qatari markets.

"The regional markets also performed better than the last quarter which raised $91.6 million in the fourth quarter of 2009 from five IPOs. While it's too early to decree that markets have rebounded, this could potentially signal the return of normalcy to the markets, which had a very difficult 2009."

Gandier said: "The largest oversubscription in the first quarter of 2010 was received by Herfy Food Services at 4.6 times offer size.

"This could be symptomatic of the caution with which new IPOs will be greeted in 2010. We may not see the hundreds or even ten-fold over-subscriptions that were witnessed during the boom years.

"Firms will need to invest more time and resources in preparing their institution for an IPO and ensuring they have a compelling equity story.

"While challenging markets will come and go, it's the companies that are fully prepared that will best be able to leverage IPO opportunities when they open."

Insurance and takaful

Out of the total six IPOs last quarter, three were in the insurance/takaful sectors. This trend was also observed in the previous quarter, when the regional markets went through a difficult phase. In the fourth quarter of 2009, three out of five IPOs were for insurance firms.

"Insurance licensing procedures in Saudi Arabia, which opened up the sector to new entrants in 2005, oblige newly licensed firms to offer a percentage of their shares to the public within a set timeframe.

"This is why we see a disproportionate number of IPOs in the kingdom's insurance/takaful sector," Phil explains.

Global IPO activity in the first quarter of 2010 showed substantial improvement over the first quarter of 2009. Results were driven by a ongoing robust Asian market and the revival of European listings.

There were 267 deals globally in the first quarter of 2010 worth $53.2 billion, compared to the 52 deals which raised $1.4 billion in the first quarter of 2009.