Middle East M&A value rockets 220%

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The value of inbound merger and acquisition transactions in the Middle East recorded at an all-time high of $7.3 billion in first nine months, up 220 per cent from the same period last year, while outbound, domestic and inter-region M&A activity declined.

The record jump in inbound M&A activity was driven by Tronox's $2.2 billion acquisition of a Saudi Arabian titanium dioxide business and Chinese stake acquisitions in Abu Dhabi's giant onshore oil concession.

Reflecting the general slowdown in the region resulting from lower oil revenues, the total value of announced merger and acquisition transactions with any Middle Eastern involvement reached $35.2 billion during the first nine months, seven per cent less than the value recorded during the first nine months of 2016, Thomson Reuters said in its quarterly investment banking analysis.

While domestic and inter-Middle Eastern M&A declined 70 per cent year-on-year to $6.2 billion, outbound activity dropped 31 per cent to $8.2 billion.

In the coming months, domestic and inter-regional M&A activity is expected to get a boost with a new round of mergers and acquisitions in the banking sector in the wake of the latest such move initiated by Kuwait Finance House and Ahli United Bank of Bahrain, according to analysts.

At least five M&A deals - three in the Islamic banking space and two in conventional - are in various stages of discussion, according to U Capital. The new round of banking sector M&A follows the landmark merger between National Bank of Abu Dhabi and First Gulf Bank in the UAE, resulting in creation of the regions second biggest bank.

Recent data released by EY shows that improved optimism and confidence on the back of stabilising oil prices and economic reforms would help brighten the outlook for mergers and acquisitions activity is in the region.

The report by Thomson Reuters shows that energy and power deals accounted for 50.7 per cent of Middle Eastern involvement M&A by value, while the financial sector dominated by number of deals.

With the Qatar Investment Authority's involvement, China Cefc Energy's acquisition of Rosneft Oil is the biggest deal with Middle Eastern involvement so far this year. Equity and equity-related issuance in the region totalled $1.2 billion during the nine months of 2017, a 20 per cent decline year-on-year and the lowest first nine months for issuance in the region since 2004.

Bolstered by Saudi Arabia's $12.4 billion international Islamic bond in September, Middle Eastern debt issuance reached $84.1 billion during the first nine months of 2017," said Nadim Najjar, managing director for the Middle East and North Africa at Thomson Reuters.

"This is 82 per cent more than the proceeds raised during the same period last year and by far the best annual start in the region since records began in 1980," he said.

Saudi Arabia was the most active nation in the Middle East, accounting for 36.1 per cent of activity by value, followed by the UAE with 15.9 per cent. International Islamic debt issuance increased 44 per cent year-on-year to reach $41.4 billion so far during 2017.

Najjar said fees from debt capital markets underwriting were up 118 per cent year-on-year, totaling $193.8 million, which makes it the highest first nine months total in the region since our records began in 2000.

Equity capital markets fees increased 48 per cent to $43.2 million, with fees generated from completed M&A transactions totaling $145.9 million, a 23 per cent decrease from last year and the lowest first nine month total since 2012.

- issacjohn@khaleejtimes.com