Tuesday 5, April 2016

Dubai – MENA Herald: 2016 has gotten off to a fairly slow start in terms of M&A activity targeting companies based in the Middle East and North Africa (MENA). Compared with Q4 2015, value has declined against a slight increase in volume, according to Zephyr, the M&A database published by Bureau van Dijk. In total, some USD 6,998 million was invested across 163 deals in Q1 2016, compared to the 161 deals worth USD 10,238 million announced in the final quarter of 2015. Despite the fairly low aggregate value figure, the result compares more favorably with the same period in previous years. If the last couple of years are any indication, many will be expecting to see an upturn in aggregate values throughout the rest of 2016.
The relatively disappointing value can be blamed on a lack of high value deals; only two transactions broke the all-important USD 1,000 million barrier between January and the end of March. Nevertheless, these deals did have a significant effect on overall dealmaking for the period. The top transaction is worth USD 2,029 million, representing 30 per cent of total dealmaking for the quarter. It took the form of an 11 per cent stake sale in Kuwait-headquartered Al Safat Energy Holding Company by Danah Al Safat Foodstuff Company. This transaction was worth almost double the second placed deal, a USD 1,021 million acquisition of Moroccan cement manufacturer Holcim Maroc by Lafarge Ciments.
In all there were 12 deals worth more than USD 100 million announced in Q1 2016. The absence of more out-and-out “mega” deals has held values down over the three months as larger individual deals have a considerable effect on overall dealmaking for a period. For example, Q4 2015 had two significant announced deals, one of which was worth USD 3,200 million while the other was valued at USD 1,000 million. In Q3 2015 just one deal broke the USD 1,000 million barrier, but it was worth USD 8,000 million and accounted for a huge 76 per cent of overall value in the MENA region for the period (although a number of other international assets spanning various regions were also targeted as part of that deal). It is clear that without these transactions, aggregate values for the respective timeframes would have been considerably lower.
Given the aforementioned Al Safat Energy Holding Company deal it is surely no surprise to discover that Kuwait attracted the most value of all MENA countries in the first quarter of 2016. In all the country was targeted in deals worth USD 2,613 million. Morocco placed second with USD 1,030 million. This figure was again largely attributable to the aforementioned Holcim Maroc deal. The UAE followed with USD 640 million.
GCC countries had a significant presence in Q1 2016 as the quarter’s top country is a GCC region. Kuwait led the rankings as the most valuable country, with aggregate deal value of USD 2,613 million. The UAE, Qatar and Saudi Arabia also placed highly, coming third, fourth and sixth with USD 640 million, USD 558 million and USD 460 million, respectively. Oman and Bahrain placed ninth and eleventh overall in terms of value. Despite the overall decline in value in the MENA region during Q1, Kuwait, Qatar and Oman actually improved on Q4.
In all, 65 per cent of total MENA dealmaking for Q1 2016 was attributable to GCC countries, while 14 of the quarter’s top 25 deals featured targets in the six countries, including the top deal. The GCC regions attracted combined investment of USD 4,570 million across 64 transactions.
Obviously the remainder of 2016 is an unknown quantity at present, but we can take a look at MENA deals scheduled to close later this year as an indication of the kinds of transactions we can expect to see over the coming months. Only one “mega” deal targeting a MENA company is currently scheduled to complete before the end of 2016 – the aforementioned Holcim Maroc transaction. The next largest pending transaction in the region involves Samsung Engineering and Samsung India increasing their stakes in Samsung Saudi Arabia in a USD 447 million transaction which is scheduled to close by the end of the year. Deals scheduled to close during the second quarter of 2016 include a USD 310 million purchase of a 40 per cent stake in Lebanon-headquartered commercial bank Credit Libanais by a consortium of undisclosed investors and Greenfields Petroleum International Company buying the balance of oil and gas explorer Bahar Energy for USD 64 million.
There have also been a number of notable rumours of deals with MENA targets in Q1 2016; In February Iranian steel products manufacturer Esfahan Steel Production Company said it was planning a capital increase worth USD 1,649 million. The largest non-capital increase rumour also emerged in February as a consortium of investors known as Adeptio said it would bid for the remaining 33 per cent stake it does not already own in Kuwait Food Company. Based on the target’s closing price the deal could be worth USD 1,000 million. As evidenced by the results for Q1, if these two deals alone are announced before the end of June they would have a considerable effect on overall deal value for the second quarter of the year.