UAE: Union Coop explores public joint-stock transition

Vijay Valecha, Khaleej Times, November 26, 2024

The Union Coop has begun studying the transition from a consumer cooperative society to a public joint-stock company (PJSC). The decision was announced during the Board of Directors meeting on Monday and forms part of the cooperative's strategy to enhance its financial resources, boost competitiveness, and meet its long-term goals, including expanding its reach, developing projects, and improving services for shareholders, customers, and the community.

The decision follows the footsteps of other retail giants in the UAE. Retailers like Spinneys already trade on the DFM, and the recent Lulu IPO on the ADX raised gross proceeds of Dh6.32 billion, marking one of the largest listings in the region. If realised, the transition is expected to contribute to the local economy while strengthening transparency and governance systems. The Union Coop would operate under the regulations governing public joint-stock companies, subject to stringent regulatory oversight. This would enhance transparency, improve credibility in financial transactions, and increase shareholders' confidence in the company's operations.

"The timing for the decision could not be better, looking at the region’s IPO craze, with the markets now bracing for Talabat’s $1.5 billion fundraising," said Vijay Valecha, Chief investment officer, Century Financial. "Union Coop’s shares were listed on the DFM in 2022 but are only open to UAE national shareholders. The share was listed at Dh3.90 and is trading at a discount at the time of writing, at Dh2.27. The company’s plan for a transition to a public joint-stock company will allow other investors, retail or institutional, and particularly expats, to participate in the company’s equity, boosting the stock’s liquidity," he added.

For DFM exchange, this would mean another major entity’s trading volume coming in, enhancing the market’s overall liquidity. It would also mean enhanced transparency and governance systems to align the cooperative to the standards of public joint-stock companies, leading to credibility and increased shareholder trust. According to the company’s own statement, being a public company could allow growth into new geographic areas and achieve strategic goals. This could, in turn, lead to a higher market share in the country’s supermarket industry.

The move to a PJSC would offer several benefits, including new investment opportunities for shareholders, who would benefit from the company's performance and financial results. Shareholders would also have the chance to diversify their portfolios through stock trading on the financial market, potentially increasing long-term returns. The transition would also enable Union Coop to expand into new regions, providing services to a wider customer base and implementing best corporate governance practices.

Following a request by the 2023 General Assembly, Union Coop appointed Al-Tamimi Company to conduct a comprehensive study on the feasibility of this transformation. The study will assess the legal and financial implications, along with a review of relevant regulations, and will be presented to the relevant authorities and the General Assembly for a final decision.

Source

Khaleej Times