UAE-based private equity firm Ithmar Capital has picked Credit Suisse and Deutsche Bank to manage the flotation of a vehicle it hopes to list on the Dubai bourse by year end, sources close to the matter told Reuters.

Ithmar is aiming to list a so-called special purpose acquisition company (SPAC), which lists and then uses the cash raised from the flotation to make private equity-style investments, several sources said.

The listing will aim to raise around Dh1.6 billion ($436 million), with proceeds to be used to invest in healthcare and education assets, including buying stakes in firms which Ithmar currently owns - most notably some of its 20 per cent holding in Al Noor Hospitals.

An offering is expected to complete before the end of the year, with one source close to the matter indicating subscription could begin as early as next month.

Repeated calls to Ithmar went unanswered. The sources spoke on condition of anonymity as the information isn't public.

After more than five years of inactivity caused by slumping investor confidence in the wake of the financial crisis, initial public offerings are returning in the UAE, with the expected success of Emaar Properties' up-to-$1.58 billion malls unit share sale set to herald a new wave of listings.

As well as Deutsche Bank - which was involved in the Al Noor flotation in 2013 and the sale of a further 7.3 per cent stake by Ithmar last week - and Credit Suisse, an Abu Dhabi-based bank will also be involved, three of the sources said.

An Ithmar executive confirmed in July an offering was planned but wouldn't be drawn further.

STRUCTURE QUESTIONS

While sources had said in July that up to Dh3 billion could be raised by the offering, the new target would still be enough to cover the 1 billion dirhams-worth of deals Ithmar was planning to do in 2014.

It would also be just enough to acquire Ithmar's 20 per cent stake in Al Noor Hospitals, which would be worth nearly $400 million at the current market price, according to Thomson Reuters data.

One issue which some of the sources said may impact its listing plans is the SPAC structure. While floating an entity to raise capital to invest is common in developed markets, such vehicles are extremely rare in the Gulf region.

Earlier this year, Marka raised Dh275 million from a Dubai listing to invest in opening retail outlets, restaurants and cafes across the Gulf region.

However, two sources said the surge of interest from investors in a firm which did not have any assets - the listing was 36-times covered - spooked the country's market regulator, the Emirates Securities and Commodities Authority (ESCA), which was concerned this represented signs of a potential stock market bubble.

As a result the regulator delayed the first day of trading for Marka, which had been expected in the first week of June but is now slated for September 25. Sources said this could point to the ESCA being cautious over approving share sales in structures such as cash shells and SPACs.

However, the source close to the matter said he was confident a deal should launch in October. - Reuters