MENA M&A Activity
The MENA region witnessed altogether 27 deals announced worth US$3,831mn during June 2008 which is the third largest amount this year with the average deal size being approx. US$142mn - as depicted in the chart that follows.
During June 2008, the largest transaction by value involved Qatar Telecom's announcement of launch of tender offer to buy 44.9% of Indosat, Indonesia's second largest mobile phone operator. Qatar Telecom has offered a price of US$0.80/share, a 19% premium on existing share price of US$0.70/share as on June 25, 2008; with transaction valued at US$1.95bn. The offer is pending approval from the Indonesian capital market regulator.
The move was triggered by Qatar Telecom's US$1.8bn acquisition of 40.8% of Indosat, where it completed the purchase from Asia Mobile Holdings.
The second largest transaction by value involved Orascom Telecom selling its subsidiary Iraqna to Zain Iraq for US$1.2bn. NBK was the sole arranger and book runner for the transaction.
The second largest transaction by value involved NYSE Euro next's announcement to acquire 25% stake in the Doha Securities Market ("DSM") for US$250mn; which was the largest ever investment made by NYSE in any foreign exchange. The state of Qatar will continue to retain 75% majority ownership of the DSM. NYSE Euronext and Qatar will build a new cash and derivatives exchange in Doha, and will also work together to explore further business opportunities in the Middle East.
Arcapita Bank, a Bahraini investment bank, agreed to acquire the UK based Freightliner Group Ltd., largest haulier of maritime containers in the UK; from 3i and Electra Private Equity. The company was valued at US$365mn. Electra received US$138mn for its 38% stake in the business. RBC Capital Markets advised Arcapita and financed the takeover; NM Rothschild advised Electra on the sale.
The fifth largest transaction by value was Norwegian company Eitzen Maritime Services ASA announcement on agreement to acquire the Dubai-based maritime services provider Seven Seas Shipchandlers LLC for US$115mn. Seven Seas Shipchandlers supplies merchant and naval vessels in the UAE, Bahrain, Oman, Qatar, Kuwait and Djibouti.
M&A activity has been following a contradictory trend across the region, with consolidation being the main theme certain fragmented industries (such as cement); and regional and sector expansions in more saturated markets (such as telecoms and real estate).
During June 2008, Lafarge announced the acquisition of 35% stake in the Algerian cement company ERCC (Meftah) cement plant for US$68mn, well positioned in Algeria, together with a 10-year management contract. (Implied price paid/ton of US$20 (based on clinker design capacity of 3.4Mt; Source: ERCC website).
The Egyptian real estate developer Palm Hills has formed a Joint Venture (JV) through a 51% stake with a Saudi partner (undisclosed) to develop land in KSA, its first project outside Egypt.
Target Industry Sectors
During June 2008, the highest volume of transactions occurred in the services sector primarily in the telecom, marine and transportation services (airlines, tourism) followed by the industrial/manufacturing, financial services/banking and real estate sectors.
Bulk or container shipping and the marine services sector has attracted large deals.
Deals for shipping, maritime services and aviation targets have contributed significantly to overall deal volume for the services sector.
To meet the long term tonnage requirements of the rapidly growing producers of petrochemicals, foreign providers of transportation services for bulk liquid chemicals have been increasing their strategic presence in the region. Key deals that have occurred are as follows:
International providers of transportation services for bulk liquid chemicals, and other specialty liquids, Stolt-Nielsen S.A. announced two 50:50 JVs with the UAE based company Gulf Navigation whose subsidiaries and divisions own and operate crude, clean petroleum products and chemical tankers. The first joint venture will own 6 new chemical tankers and technical ship management will be provided by the second JV.
Norwegian company Eitzen Maritime Services ASA announced its agreement to acquire the Dubai-based maritime services provider Seven Seas Shipchandlers LLC for US$115mn.
A number of deals were witnessed in the financial services/banking sector during the period:
Emirates Lebanon Bank (a fully-owned subsidiary of Bank of Sharjah), and BNP Paribas, announced filing for regulatory approval in relation to a partnership agreement in Lebanon. Subject to the approval of Central Bank of Lebanon, Bank of Sharjah will be acquiring through its Lebanese subsidiary, the activities of the Lebanese branch of BNP Paribas). Emirates Lebanon Bank will be 81% owned by Bank of Sharjah with BNPI France holding the balance.
On June 17, 2008, Societe Generale sold its entire 7.8% stake or 83.8mn shares in Oman-based BankMuscat to the Royal Court Affairs of Oman at the price of RO2.035/share (market price as on June 17, 2008 was ~RO7.4/share, was sold at a discount of 72%). The Court of Royal Affairs is Bank Muscat's largest shareholder, with direct and indirect ownership (through various state pension funds) of 17% and 13% respectively and this transaction brings the stake to 24.8%. Source: BankMuscat annual report.
Targets' Countries of Origin
The highest number of targets originated in the UAE during June 2008, followed by the companies based out of Algeria, Egypt, Qatar and Jordan.
The largest transaction by value in UAE was on account of Norwegian company Eitzen Maritime Services ASA announcement on agreement to acquire the Dubai-based maritime services provider Seven Seas Shipchandlers LLC for US$115mn. Whilst in Egypt, the largest transaction was Egypt's Saudi Egyptian Investment and Finance Company acquiring 12.5% of Arab Dairy Company for 48.6 mn EGP (US$9.1mn); which will raise the ownership in Arab Dairy to about 1.85mn shares or 30.76% of the company. Arab Dairy Company an Egypt-based company engaged in the dairy industry, started production in 1990 with predominantly cheese products. The Arab Dairy Company is currently trading at a P/E of ~19 times and EV/EBITDA of ~14 times (Market data as on July 15, 2008).
Acquirers' Countries of Origin
The highest number of acquiring countries of origin was the UAE followed by Kuwait and Egypt.
Cross border deals by foreign countries formed a large share; highest number being the investors from Germany followed by other international players:
TUI AG a German company owning travel agencies, hotels, airlines, cruise ships, retail stores, and container ships, has increased its holding in Moroccan low cost carrier Jet4You to 100%. In the past TUI AG sold off many of its industrial concerns and purchased several major travel and transportation firms.
Germany based Schindler Holding acquired 49% of the equity of Al Doha Elevators & Escalators WLL in Qatar.
ArcelorMittal, the world's largest integrated metals and mining company, announced its intention to acquire 60% of the capital of UAE based Dubai Steel Trading Company LLC (DSTC FZCO), a newly incorporated company located in the Dubai Free Zone, a key steel distributor in the UAE. The acquisition is a step towards the creation of a distribution network in the GCC region by ArcelorMittal.
MENA M&A Key Transactions
M&A activity intensified in the services sector in the telecom, marine and transportation services (airlines, tourism); whereby they were largely cross border transactions.
During the month of June 2008, the services sector registered the highest transaction by value amounting to US$3,265mn.
Anticipated mergers/Key announcements: MENA
Abu Dhabi based Alnair Capital Holding ("ACH") is seeking an approval to raise its stake in Kazakhstan based Kazkommerts bank to 25% by acquiring 17% of its shares. ACH has approached the Financial Supervision Agency of Kazakhstan for a status of a banking holding in compliance with the Kazakh laws to secure a permit to acquire more than 25% ordinary shares in Kazkommertsbank.
Oman Telecommunications Co. (Omantel) is considering a bid for a majority stake in Pakistan's telecom company Worldcall to gain a foothold in the world's third-fastest growing telecoms market. Omantel may consider a 51% stake in Worldcall, which may be worth around US$113mn at its last traded price.
Kuwait based Noor Financial Investment Company plans to raise its stake in Pakistani Islamic lender Meezan Bank to 42% from 35%, which may be in the range of US$20mn, which is subject to approval of Pakistan's central bank.
Other Key Developments
June 25, 2008: Barclays Bank raised US$8.8bn from investors including Qatar and Japan's Sumitomo Mitsui. Half of the cash will be used to rebuild capital while other half to pursue growth.
Banque Misr has canceled the sale of a stake in government controlled Banque Du Caire, the country's third largest state-owned bank, as offers by three bidders failed to meet price expectations. UAE based Mashreq bank initial offer for 67% for the bank was rejected and is still interested in expanding into the Egyptian market. Mashreqbank, Emirates Telecommuni-cations Corp. and DIFC Investments had together offered US$1.3bn for Banque du Caire.
© Arab Times 2008
