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- M&A in MENA has gathered momentum in terms of volume since March 2008 • Deal values were the highest in the financial/real estate sector.
- Egypt emerged to be as the top target country in terms of volume in May 2008.
Markaz published its report on mergers and acquisitions activities in the Middle East and North Africa for the period of January to May 2008. The Markaz M&A Report indicated that the M&A market has grown considerably, with cross-border transactions leading the charge; witnessing altogether 34 deals worth US$1.8bn during May 2008. The largest transaction by value involved Burgan Bank’s announcement to buy United Gulf Bank's holdings in 4 regional operations for a total of US$725mn; in exchange for UGB’s acquisition of 200mn new shares in Burgan Bank. The deal evidences KIPCO’s determination to become a leading regional financial services group across three main activities, commercial banking, insurance, and pension and asset management. The YTD largest transaction by value was in January 2008; it involved Qatar’s US$50bn sovereign wealth fund, Qatar Investment Authority, acquiring a strategic stake in British supermarket chain JSainsbury for US$21bn. QIA is expected to continue its acquisition program, and is currently targeting to acquire financial institutions and consumer-oriented export companies.
During the first half of 2008, private equity partnering opportunities with sovereign wealth funds and other foreign investors have contributed largely to the deal activity.
Value vs. Volume of MENA Mergers & Acquisitions Note: Value & volume for the deals include completed, announced and pending closure transactions in the MENA region. Source: Bloomberg Top Transactions by Value (May 2008) Date : 06/05/2008 Target : United Gulf Bank Acquirer : Burgan Bank Sector : Financial Services/Banking Value : US$725mn Status : Pending Date : 27/05/2008 Target : TMG Holding Acquirer : TMG Investment Sector : Real Estate/Construction Value : US$243mn Status : Completed Date : 13/05/2008 Target : Egyptian Fertilizer Acquirer : Orascom Construction Sector : Industrial Value : US$196mn Status : Completed Date : 27/05/2008 Target : Orascom Telecom Acquirer : Orascom Construction Sector : Services Value : US$196mn Status : Completed Date : 19/05/2008 Target : BBK Acquirer : Ithmaar Bank BSC Sector : Banking Value : US$149mn Status : Pending Source: Bloomberg (Sorted as per value of deals, in ascending order) Notes: 1. The above mentioned dates are announcement dates. 2. The sectors mentioned above are relating to sector as per the target company. Target Industry Sectors During May 2008, the highest volume of transactions occurred in the real estate/construction sector primarily in Abu Dhabi, followed by Qatar and Egypt. Many countries in the region are trying to diversify away from their reliance on oil and gas revenues, and are investing significantly into the development of the Real Estate sector, the spillover effect of this is being enjoyed by the construction, services, tourism and retail sectors. This liquidity, along with the high oil prices to date has created a substantial cash surplus in the region. Abu Dhabi is fast becoming the platform of large-scale, mixed-use developments, with projects proposed, planned or under construction totaling about $327bn. Source: Bloomberg (Sorted as per sector) Qatari Diar and its real estate arm Barwa Real Estate Company formed a joint venture (JV) with Suez - French industrial and services group. The objective of the JV was to identify, assess and bid for multi-utilities projects developed by Qatari Diar in Qatar and abroad while benefiting from the combined strengths of both partners. Qatari Diar is looking at boosting its investments further in sustainable developments in the country especially in real estate and education. Targets’ Countries of Origin The highest number of targets originated in Egypt during May 2008, followed by the companies based out of KSA. The largest transaction by value in Egypt was on account of Talaat Moustafa Group (TMG) Investment acquisition of the National Bank of Egypt’s shares in mother company TMG Holding in a deal worth LE1.275bn (US$243bn); in a bid to enlarge its family stake. The Group is also currently exploring serious real estate opportunities in KSA. Acquirers’ Countries of Origin The highest number of acquiring countries of origin were based out of Egypt or the GCC (primarily KSA and UAE). Cross border deals have been originated more from the GCC region, due to high liquidity in the region. Non-GCC countries like Egypt have historically been experiencing local M&A transactions. Although exceptionally, in 2007, the largest finance sector acquisition was witnessed by Egypt’s EFG Hermes buying Lebanon’s Bank Audi Sal. MENA M&A Key Transactions During the month of May 2008, the financial services/banking sector registered the highest transaction by value amounting to US$874.34mn followed by the real estate/construction sector (US$243.01mn). The competitive environment within the banking space has intensified, as cross-border barriers are gradually lowered. Compared to April 2008, wherein the highest transaction value was registered by the telecom sector when Orascom Telecom Holding S.A.E. commenced its cash tender offer to purchase up to 106mn of its ordinary shares for a total of US$1,622mn. Source: Bloomberg (Sorted as per sector and value) Anticipated mergers/Key announcements: MENA June 05, 2008: Possible merger talks of Egyptian Commercial International Bank with Arab African International Bank. Talks earlier in 2007 had ended in failure. June 05, 2008: Agility has signed a conditional agreement to acquire Coosa Freight, a full-service ocean freight forwarder with offices in six key locations in China and a presence in Hong Kong, USA, and Canada. June 15, 2008: Kuwait's investment bank Global Investment House plans to enter four new markets in 2009 and increase its portfolio in Egypt. The company is also eyeing investment opportunities in Egypt, through a privatization program, or a public offering. Please see our follow up coverage of M&A activity in Egypt at www.markaz.com/research About Kuwait Financial Centre “Markaz” Kuwait Financial Centre 'Markaz', with total assets under management of over USD 5.09 billion as of 31 March 2008, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997; and was recently awarded a BBB+ corporate rating by Capital Intelligence Ltd. -End-