Emirates May Sell 30% Stake in Initial Public Offer

Emirates May Sell 30% Stake in Initial Public Offer (Update3)

By Massoud A. Derhally and Andrea Rothman

Nov. 13 (Bloomberg) -- Emirates, the biggest Arab airline, may seek as much as $9 billion in a share sale, provided the Dubai government approves an initial public offering that would be the largest in the Middle East.

``If we do it, it will be 20 to 30 percent'' of the company, Chairman Sheikh Ahmed bin Saeed al-Maktoum said today in a telephone interview. ``I don't have a date. It's a government decision.''

Emirates President Tim Clark has said the Dubai-based airline may be worth as much as $30 billion, more than the combined market value of Air France-KLM Group and Deutsche Lufthansa AG, Europe's largest airlines. The carrier would follow Dubai-owned port operator DP World Ltd. in selling shares as the Persian Gulf emirate builds its reputation as a financial center.

``Emirates doesn't need the money, it needs the credibility,'' Doug McVitie, managing director of Arran Aerospace, a consultant in Dinan, France, said in a telephone interview today. ``It has to be seen as able to attract investment from people who are willing to take a risk. There is a huge difference between government dollars and investor dollars.''

Emirates, the largest customer for Airbus SAS's double-decker A380 airliner, started in 1985 with two leased planes. The carrier now operates 111 aircraft, including freighters. It placed more than $34 billion in orders and options at this week's Dubai Air Show, giving the airline firm commitments for 205 aircraft.

The carrier is at the ``peak of the industry'' and is ``the airline to match,'' McVitie said. In the fiscal year ended in March, the company's profit rose 25 percent to 3.1 billion dirhams ($844 million) from 2.48 billion dirhams, helped by rising passenger and cargo traffic.

`Hungry'

Clark said the market is enthusiastic for an IPO. ``It's hungry, it's ready,'' he said. ``If you floated this company, the funds in the region will take care of that valuation. You wouldn't need any institutional investors from the West.''

Emirates has added destinations in China and India, betting that economic growth in Asia's two most populous countries will spur demand for travel.

The company placed a firm order worth $31 billion for 70 A350s and 11 superjumbo A380s, as well as options for 50 more A350s, from Toulouse, France-based Airbus on Nov. 11, the opening day of the Dubai show. It also bought 12 of Chicago-based Boeing Co.'s 777 aircraft valued at $3.2 billion.

Dubai Show Orders

Middle Eastern carriers have posted orders and options worth about $85 billion with Airbus and Boeing this week at the Dubai show. The value of the aircraft is based on list prices and doesn't reflect discounts normally given for large purchases.

Selling shares of Dubai's ``crown jewels'' is a key step in putting the emirate on the financial map, Fahd Iqbal, senior analyst at investment bank EFG-Hermes UAE Ltd, said in an Oct. 30 interview.

Shares of Dubai-owned companies including Emirates offer ``excellent diversification opportunities for global investors and there will be good demand for the IPO, should that happen,'' he said.

Air Arabia, a low-cost airline based in the United Arab Emirates, raised 2.57 billion dirhams in an IPO earlier this year that received 50 percent more bids than shares on offer. The Sharjah-based carrier is valued at 7.98 billion dirhams.

Initial public offerings in the six Gulf Arab countries captured $5.9 billion in the first nine months of 2007, Abu Dhabi- based private-equity firm Gulf Capital said in a report last month. The 26 IPOs this year received more than six times the amount of bids than shares on offer, Gulf Capital said.

The DP World initial share sale may raise as much as $4.32 billion. The company said Nov. 5 that shares will be listed in Dubai by the end of the month.

To contact the reporters on this story: Massoud A. Derhally in Dubai at mderhally@bloomberg.net ; Andrea Rothman in Toulouse, France, at aerothman@bloomberg.net .

Last Updated: November 13, 2007 11:57 EST