Record Tunisia share offer is private equity milestone

Reuters

By Aziz El Yaakoubi

TUNIS (Reuters) - A Tunisian maker of diapers and paper towels has listed on the local stock exchange after the country's largest offer of shares, a sign of resilience in capital markets that have been battered by years of political instability.

The listing marked the first time that a private equity firm used the Tunis Stock Exchange to exit an investment, traders said.

The main Tunisian stock market index fell 4.3 percent last year as many global bourses were surging, and is down 15 percent since the end of 2010.

Conflict between Islamist and secular politicians has weighed on Tunisia's economy since the overthrow of autocratic leader Zine al-Abidine Ben Ali in January 2011. After months of bickering, the national assembly on Wednesday appointed a council to oversee elections later this year.

But the listing of Societe d'Articles Hygieniques (SAH), after one of the handful of initial public offers that have been conducted annually since the revolution, shows underlying investor interest in the country.

SAH's IPO closed in December after Emerging Capital Partners (ECP), an international private equity firm which focuses on Africa, decided to exit an investment in SAH which it had launched in 2008.

ECP sold 14.18 million SAH shares, a 49 percent stake in the company, for 132.6 million dinars. Ninety percent of the shares were placed with 85 local and international investors, and the rest through a domestic offer that was oversubscribed 22.1 times, it said.

The private equity firm appeared to make a substantial profit on its investment; it announced in 2008 that it had paid $47.3 million for its stake, at a time when the dinar was substantially stronger against the dollar.

SAH shares jumped 18 percent on their first day of trade to close at 11.03 dinars on Wednesday, up from their IPO price of 9.35 dinars.

FOREIGN INTEREST

Since 2008, SAH has expanded its sales of absorbent hygiene products to 17 countries in Africa, creating subsidiaries in Algeria and Libya and developing a paper mill in Tunisia.

Over the past two years, SAH's business has grown 17 percent annually; it now employs over 2,000 people and its sales were expected to exceed $120 million in 2013, ECP said.

Nayel Georges Vidal, director at ECP's Tunis office, said he believed SAH's listing could stimulate foreign interest in Tunisia's stock market in general.

"From our on-the-ground perspective here, we believe that in the long term, Tunisia is moving along the right path to continued growth, economic stability and improved governance," he said in an email to Reuters.

Some stock traders said SAH would encourage a string of Tunisian IPOs in coming months, though analysts say that to attract major foreign investment in the market, which has a capitalisation of only about $9 billion, the government needs to list big state-owned firms such as steel producer Foulahdh and Tunisie Telecom.

The government has been looking at such a possibility but preparing the companies for listings could involve cutting staff, and that may be politically impossible, especially before elections.

In February 2011, a month after the overthrow of president Ben Ali, Tunisie Telecom said it had cancelled plans for a joint IPO on the Tunis and Paris stock exchanges after consultations with trade unions. Workers at the company had been threatening industrial action if there were job losses.

Within North Africa, an ECP fund has stakes in Algeria's Generale Assurance Mediterraneenne and a subsidiary of banking group Oragroup in Mauritania.

"We continue to review a pipeline of investments in North Africa as it remains an important region of Africa with a strong growth perspective and growing exchanges with sub-Saharan Africa," Vidal said.

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