Page 256 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

238 Dubai & Co.

are communicated to Gulf principals and their investment
managers.
A second manner in which Gulf capital can be injected is at the
“business unit” level. These transactions, typically involving both
equity and debt, are far more customized and involve in-depth
negotiations. The sales of Aston Martin by Ford and GE Plastics are
examples of such transactions. Structuring such deals may include
accommodation of Gulf investors’ particular circumstances and needs,
such as sovereign or semisovereign tax status or preference for Sharia
compliance. Especially when such deals are for strategic and not only
for financial reasons, global firms with business lines to dispose of can
expect attractive valuations from Gulf buyers. Global investment banks
are now more able than ever before to showcase deals to GCC investors.
A third level of capital injection, and one that may become
common as GCC economies liberalize and relax their ownership
restrictions further, is raising capital at the subsidiary or regional
entity level. In some respects, banking joint ventures such as the
Saudi Hollandi Bank—in which ABN Amro retained an equity
stake while taking on local Saudi investors—could be considered
45
forerunners to this model. Multinationals can explore funding—at
least partially—their Gulf or Middle East operations through rais-
ing capital for a region-specific entity from regional investors. A
company could “spin out” its Middle East business or create a new
entity for the region. Capital could be raised through a private
placement or through a local exchange.
The increased sophistication of local exchanges is a positive
development for those seeking to raise Gulf capital. In addition to
general enhancements such as tighter disclosure and governance stan-
dards, new exchanges are being created with regulations and operat-
ing guidelines based on global best practices. At the forefront of these
new exchanges is the Dubai International Financial Exchange (DIFX),
which is regulated independently by the Dubai Financial Services
Authority. Some of the main differences between the DIFX and extant
“onshore” regional exchanges are summarized in Table 8.4. 46
The DIFX’s approach, in summary, is more “issuer friendly.”
The exchange’s aspiration is to be a world-class market filling the
geographic and time-zone gap between London and Hong Kong. It
therefore seeks to create an environment by which multinationals
feel comfortable listing there in addition to one or more of the
global exchanges such as New York or London.