Markaz: Saudi Aramco’s acquisition of SABIC leads the top GCC M&A transactions during Q1 2019


Saudi Arabia’s industrial sector leads the top GCC M&A transactions during Q1 2019 as per a report recently issued by the Investment Banking Department at Kuwait Financial Centre “Markaz”. The top reported deal value during Q1 2019 was $69.1 billion and involved Saudi Aramco’s acquisition of a 70% stake in SABIC from the Public Investment Fund of Saudi Arabia.

Two of the top transactions involved the announced merger of banks. Kuwait Finance House (KFH) has announced its intention to merge with Ahli United Bank (AUB) at an average exchange ratio of 2.3 shares of AUB for each share of KFH. ADCB and Union National Bank have agreed to merge and collectively acquire Al Hilal Bank, whereby the merged entities will have a $114 billion asset base. Italy’s Eni and Austria’s OMV will collectively acquire a 35% stake in ADNOC Refining for an estimated $5.8 billion, whereby ADNOC will retain the remaining 65% stake in the company. KKR and BlackRock have acquired a 40% stake in ADNOC Oil Pipelines, an entity that will lease ADNOC’s interest in 18 pipelines for 23 years.

GCC M&A Growth

According to Markaz’ report, the number of closed M&A transactions in the GCC during Q1 2019 witnessed a 39% increase compared to Q1 2018. Among the region, Kuwait reported the highest increase in the number of closed transactions in Q1 2019 compared to Q1 2018, while Qatar was the only country among its GCC counterparts that did not witness any change in the number of transactions during the same period.

Acquirers and Targets

GCC acquirers accounted for 60% of the total number of transactions during Q1 2019 and 75% during Q4 2018. Foreign acquirers accounted for 34% of the total number of transactions during Q1 2019 and 17% during Q4 2018. Buyer information was not available for 6% of the transactions in Q1 2019.

Each of the GCC acquirers seemed to have a different appetite with regards to M&A transactions during Q1 2019. Kuwaiti acquirers preferred investing in their home country. Saudi Arabia mostly invested in their home country and equally between other GCC countries and outside the GCC. UAE acquirers mostly invested outside the GCC and within their home country. Bahraini acquirers only invested outside the GCC. Qatari and Omani acquirers each engaged in one acquisition in their respective countries.

Foreign Buyers

Q1 2019 witnessed a 70% increase in the number of completed transactions by foreign buyers compared to Q1 2018.  In comparison to Q4 2018, the number of such transactions grew by 89%.

UAE targets represented 71% of the closed transactions by foreign acquirers during Q1 2019, while Saudi Arabia and Kuwait represented 23% and 6% respectively of the transactions during the same period. Bahraini, Omani and Qatari targets did not attract any foreign buyers during Q1 2019.

Sectorial View

The Industrials, Financials, and Consumer Discretionary sectors witnessed the highest number of transactions, collectively accounting for 62% of the total closed transactions during Q1 2019. The Media, Insurance, Telecommunication Services, and Aviation sectors each accounted for 2% of the total closed transactions during Q1 2019; collectively amounting to 8% of the transactions during the period.

Deals Pipeline

There was a total of 14 announced transactions in the pipeline during Q1 2019; representing a 27% increase in the number of announced transactions compared to Q4 2018.

UAE and Saudi Arabia collectively accounted for 79% of the announced transactions during Q1 2019. Oman and Bahrain made up 21% of the announced transactions.