PTT Exploration and Production Public Company Limited (PPT Exploration) leads the top GCC M&A transactions during Q1 2021 as per a report recently issued by the Investment Banking Department at Kuwait Financial Centre “Markaz”. The report highlights the USD 2.6 billion transaction that was announced by the Thai company through which it intends to acquire a 20% stake in Block 61, a central gas processing facility based in Oman, from BP plc. Upon closing, BP plc will retain a 40% stake in Block 61 while Oman Oil Company and Petroliam Nasional Berhad (Petronas) will hold 30% and 10%, respectively.
Masraf Al Rayan (Al Rayan) took on the second largest transaction as it defined a merger agreement with Al Khaliji Commercial Bank (KCB), which states that it will acquire 100% of the latter bank. In exchange, Al Rayan will issue 1.8 billion shares to KCB’s shareholders. The merger is expected to close for an estimated USD 2.2 billion . The following transaction oversaw Sublime Commercial Investment acquire a 12% stake, or 960.0 million shares, in Aldar Properties for a total consideration of USD 952.8 million at USD 1.00 per share. Moreover, the Abu Dhabi Pension Fund has entered into a strategic partnership through which it has acquired a 31% stake in Abu Dhabi Energy Real Estate Company (ADEREC) from the Abu Dhabi National Oil Company (ADNOC) for USD 900.0 million.
Moreover, ADNOC will retain a 69% stake in ADEREC upon closing. Lastly, National Marine Dredging Company announced that it has successfully completed its merger with the National Petroleum Construction Company, creating one of the largest EPC contractors in the MENA region that is specialized in integrated oil & gas and marine services. The transaction closed for an estimated value of USD 688.8 million .
GCC M&A Growth
According to Markaz’s report, the GCC market sealed a total of 36 transactions throughout Q1 2021, consistent relative to Q4 2020 levels yet a 50% growth relative to Q1 2020. With the exception of Omani and UAE targets, the remaining GCC targets recorded zero to negative growth in the number of closed transactions relative to the previous quarter.
Acquirers and Targets
The majority of closed transactions during Q1 2021 and Q4 2020 were carried out by GCC acquirers. Of the total number of closed transactions during Q1 2021, GCC acquirers accounted for 75% while foreign acquirers accounted for 17%. The remaining 8% represents transactions for which the buyer information was not available. GCC acquirers also dominated the market during the previous quarter as they accounted for 81% of the total number of closed transactions while foreign acquirers accounted for 11%. Once again, the remaining 8% represents transactions for which the buyer information was not available.
Furthermore, GCC acquirers primarily invested in companies within their local markets and in international markets, and targeted regional companies to a lesser extent. Throughout Q1 2021, GCC acquirers closed a total of 24 transactions within their local markets, compared to 27 transactions in Q4 2020 . In addition, GCC acquirers closed 16 transactions cross-border, relative to ten cross-border transactions in Q4 2020. It is worth noting that UAE buyers accounted for precisely half of the cross-border transactions that closed, followed by Saudi Arabia and Bahrain, at approximately 19% each, concluded by Kuwaiti buyers at 12%.
The GCC market received a slightly greater level of interest from foreign buyers in Q1 2021 when compared to the previous quarter. Throughout Q1 2021, foreign buyers closed six transactions whereas in Q4 2020, only four transactions were completed. Although this implies a growth quarter over quarter, this still remains far behind the level of foreign activity that GCC markets have attracted in the past. A primary reason behind the weaker level of foreign activity is the lingering uncertainty regarding the outlook of most of the GCC markets. This concern coupled with the spread of existing and new strains of the COVID-19 virus and its effect on economic activity have generated a force of reluctance amongst foreign investors.
With that being said, foreign buyers demonstrated a particular interest in Kuwaiti, Saudi and UAE companies. The UAE continues to be one of the most attractive markets relative to its peers while Kuwaiti companies emerged as attractive contenders following several consecutive quarters of no foreign activity (closed). Neither of the remaining GCC countries recorded any closed foreign buyer deals throughout the quarter, which has been a persisting trend for Omani and Qatari targets throughout the past two consecutive quarters.
Moreover, the transactions that closed throughout the most recent quarter targeted companies that operate across various sectors, highlighting another trend that has remained strong throughout the past few quarters. The sectors that witnessed the greatest level of activity throughout Q1 2021 were the Industrials, Consumer Staples and Real Estate sectors. Collectively, these three sectors accounted for over 41% of the transactions that closed during the quarter.
Deals in the Pipeline
By the end of the quarter, there was a total of 27 announced transactions in the pipeline, compared to 26 transactions in Q4 2020. The majority of these transactions involved Saudi and UAE targets, who accounted for 48% and 30% of the total number of announced deals, respectively. Bahraini and Qatari targets each accounted for approximately 7% of these transactions whereas the remaining transactions were attributed to Kuwaiti and Omani targets. Bahraini, Qatari and UAE targets witnessed a slight growth in activity relative to Q4 2020, whereas the remaining markets recorded zero to negative growth.