Abu Dhabi’s ADQ sovereign wealth fund is planning to list the emirate’s ports on the local stock exchange in a bid to generate liquidity and realise the value of logistics infrastructure assets with solid earnings. Abu Dhabi Ports represents just under 14% of the Emirate’s non-oil economic growth and as such is likely to attract significant interest among global investors. However, it has room to expand and despite Abu Dhabi being the UAE’s richest emirate it has a long way to go to match Dubai’s Jebel Ali port, owned by DP World.

IPOs of chunky legacy assets come as Abu Dhabi SWFs drive forward their venture capital investments, with an eye on tech in emerging markets, as well as renewables infrastructure and carbon reduction.

The planned merger of Arkan and Emirates Steel, approved in June, will create the UAE’s biggest steel and buildings material company, majority owned by sovereign wealth fund ADQ’s Senaat. The consolidation could be a prelude to ADQ’s Senaat making future public offerings in the new entity, freeing up liquidity for portfolio diversification. Senaat currently owns 51% of Arkan and all of unlisted Emirates Steel and would own 87.5% of the merged listed entity, which is expected to be worth more than US$3.5 billion.

ADQ assumed control of Senaat, an industrial holding company, in March 2020 alongside a raft of other state-owned companies in non-oil sectors. Global SWF has estimated total AUM at US$110 billion, a figure that ADQ has said is not far off the precise but undisclosed total. Senaat continues to exist as a separate legal entity, but with ADQ increasingly pushing into venture capital, including in emerging markets, it may press the industrial holding company to expand its reach – or potentially provide liquidity for ADQ’s expansion through sell stakes on the public market.

While ADQ looks to sell stakes in its chunky legacy assets to gain some cash and agility in high growth venture capital, it has simultaneously poured funds into venture capital. It has established the Alpha Wave Incubation Fund, indicating it is rapidly building up the capacity of its in-house team. Research by Global SWF has identified a venture capital team at least as large as Abu Dhabi stablemate, the Abu Dhabi Investment Authority, and it has been building interests in early-stage businesses in India and Southeast Asia – a massive shift in emphasis from an erstwhile infra holding company.  Since its launch, the investor has scooped up a range of assets that go beyond a focus on infrastructure, including a 45% stake in commodities trader Louis Dreyfus Cohealthcare and pharma companies, and a digital bank.

Venture capital in emerging markets will be an ongoing theme for the state-owned investor – a massive shift in emphasis from an erstwhile infra holding company. Since the beginning of the year, ADQ has invested around US$1.3 billion in private equity, including VC rounds in PolicyBazaar, Flipkart and Byju’s in India, Getir and Trendyol in Turkey, and Egypt’s Amoun Pharmaceutical Company. The trend is obvious: it has a strong taste for emerging market venture capital with a strong focus on e-commerce, edtech and healthcare.

It retains an interest in domestic infrastructure, including its involvement in the US$2 billion joint venture with ADNOC in the petrochemicals sectorTa’Ziz, announced in November. This will include a new port, utilities, infrastructure, feedstock supply and shared services. It also acquired a 10% stake in ADNOC’s gas pipeline assets in October, costing it over US$1 billion.

The Emirate’s sovereign wealth funds are likely to use the Abu Dhabi Stock Exchange to launch IPO of domestic assets, both to create dry powder to pursue high yield investments and to achieve maximum gain on mature assets. Listing on the local bourse also supports local market depth and breadth with hopes of at least 10 new listings in 2021, according to the exchange’s chair.

Mubadala is also looking to liquidate some of its large private equity holdings. In July, it staged an IPO of its wholly owned satellite communications firm Al Yah Satellite Communications Company (Yahsat) on stock exchanges this week. It attracted strong demand, raising about US$731 million, according to Bloomberg. It represented the first major IPO on the Abu Dhabi bourse since Abu Dhabi National Oil Co Distribution was listed in 2017. Established up in 2007, Yahsat is one of the largest providers of satellite communications services in the world in terms of annual revenues.

Yahsat is among the three portfolio companies that Mubadala is seeking to take public this year, sources previously told Reuters. It is now driving towards IPOs in Emirates Global Aluminium and chip-producer GlobalFoundries. Mubadala’s exits in 2020 included chunky stakes in Energias de Portugal, Borealis, Aldar Properties, Unicredit and Torresal Energy – together valued at nearly US$11 billion.

Related funds ADQ Mubadala