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North African Companies As Foreign Investors in their Own Region

From Morocco's Attijariwafa Acquiring A Third of Tunisia's Banque du Sud, to Naftal of Algeria Bidding for Oil Distributor Agil

North African companies are looking for ways to invest in neighboring countries within their own region. For some of these companies, it is a way of recycling some of the billions of dollars earned in the lucrative oil and gas market, others are re-channeling part of their profits into promising enterprises, often through partnerships with European companies. Two of the most current deals are the recent privatization of BDS Bank and the pending sale of Agil.

In the first case, the Moroccan bank Attijariwafa and its Spanish partner Banco Santander have reportedly acquired 33.5% stake in the Tunisian Banque du Sud (BDS). Grupo Santander already controls a 14.5% stake in Attijariwafa proper.

While initially five banking groups expressed interest in BDS, only two ended up making offers. The five groups are Lyonnais/Crédit Agricole, BNP, Santander/Attijariwafa, Banque populaire-Natexis, and BIAT. Offers came from France's BNP and the Spanish-Moroccan duo Santander/ Attijariwafa.

The selection of Santander/Attijariwafa did not come as a surprise. It was the result of months of negotiations and never-ending reorganization of BDS. For more than a year, the Moroccan bank Attijariwafa has been focusing its attention on acquiring BDS. But it withdrew from competition in the earlier offering arguing that BDS was not in a good shape. According to sources close to Attijariwafa Bank, the financial situation of Banque du Sud was "precarious and fragile and growth prospects were very limited in light of the economic environment in which the bank was operating." Apparently this has changed.

In May 2004, Attijariwafa Bank sent a team of financial specialists to perform an in-depth audit of Banque du Sud. The Moroccan bank was not alone in considering the acquisition as three European banks were making similar assessments with the potential to acquire Banque du Sud. The government of Tunisia has been seeking to sell the 33.54% stake it owned in the bank, but none of the four banks that expressed an initial interest made an offer and all of them ended up withdrawing.

However, this latest news is indicative of how far the Tunisian government went to accommodate the requirements of foreign investors, in particular as Banque du Sud appears to have large bad loans in comparison to its financial capacity. And to make things even more complicated, the Tunisian banking sector has had sluggish performance, growing by just 1.7% in 2002 in what was the weakest year in 16 years.

At TND 60 million, the price paid by Santander/Attijariwafa is affordable for the two partners but may be a bit pricier than what an investor is willing to pay. This represents a share price of TND 9, while its stock exchange capitalization as of October 13, 2005 (date of purchase) was TND 168.2 million or a share price of TND 8.41. Sources say Santander and Attijariwafa have equal share of the stock they acquired. Longer term, Santander and Attijariwafa will likely be seeking to raise their shareholding of BDS to 51% through purchases in the stock exchange. There are plenty of BDS shares available on the market, in particular after the Italian bank Banca Monte Dei Paschi Di Siena sold its 16.96% stake of BDS for TND 7.810 per share.

Attijariwafa is an important bank in Morocco and its partnership with Santander and acquisition BDS stock are indicative of its growing interest in international markets, in particular in neighboring countries. Attijariwafa became Morocco's largest bank after the September 2004 merger of BCM (Banque commerciale du Maroc) and Wafabank. At the end of 2004, it had €9 billion in assets and an estimated 30% share of the Moroccan banking sector.

The bank is organized into five autonomous business units, each of which specializes in a particular banking segment such as investment banking, corporate banking, retail banking, etc. The bank also has a real estate unit, long-term leasing services and other financial institutions through its subsidiaries Wafasalaf , Wafa Immobilier, Wafabail, Wafacash, and Wafa LLD.

Attijariwafa's partner in this deal, Santander is Spain's largest bank and is very active in Latin America. In Europe, Santander is known for having acquired Britain's Abbey National. Its Tunisian acquisition is also not a surprise. Spanish businesses have channeled part of their foreign investment into Tunisia, in particular in the cement production sector where the Algerian-Tunisian joint company Sotacib was currently acquired by a Spanish firm.

This latest acquisition of BDS bodes well for the sluggish Tunisian financial sector. The financial industry in Tunisia needs major attention and the Santander/Attijariwafa duo is likely to participate to the growth of that sector as they join France's BNP Paribas, now the main shareholder of Tunisia's UBCI Bank, and France's Société Générale, which is the primary equity investor in Tunisia's UIB.

For Santander and Attijariwafa, partnership has been the driving force in their common strategy and in addition to their latest acquisition, the two are working to launch a common strategy to market their services to the Moroccan expatriate community residing in Europe.

Santander has also been active in Tunisia where it has an equity investment into the Tunisian investment bank BAT. Together with BAT, Santander advises the Tunisian government on several privatization projects.

Elsewhere, the Tunisian state is expected to relinquish 35% of domestic oil and gas distributor Société Nationale de Distribution des Pétroles AGIL S.A. to a foreign investor. A tender was released in July 2005, in an operation piloted by the Spanish Santander Investment Services SA and Banque d'Affaires de Tunisie BAT.

Since then six companies have been pre-qualified, including Algeria's Naftal, a subsidiary of oil giant Sonatrach which specializes in oil product distribution within Algeria. A Libyan oil distribution company has also submitted its bid. The Libyan company is already active in Tunisia with its own distribution network. A winner is expected to be chosen in November 2005.

Agil controlled 47% of the Tunisian petroleum product distribution market with a network of 188 gas stations. Its 2003 revenue reached TND 567 million, equivalent to €375 million, and an after-tax profit of TND 8 million (€5 million).

Libya is also a target to neighboring investors. While about one thousand Tunisian companies conduct trade with Libyan partners, it is only recently that a shift toward direct investment has begun. Some 20 Tunisian companies started to commit investment funds in Libya. These companies have joined the Tunisian private industrial firm the Lotfi Abdennadher Group, which pioneered the concept of Tunisian investment in Libya. This company has long been the only Tunisian firm with actual investments there. The Bayahi Group is currently preparing to launch a food distribution network in Libya, before expanding in manufacturing.

The Poulina Company is already well ahead in this quest to set up a presence in Libya. In fact, for those seeking to set up shop there, there is a great deal to learn from the Poulina experience. The company has been active there for over 25 years, successfully producing ceramics and packaging. Service companies are also looking at investment opportunities in Libya. Headed by Mondher Ben Ayed, Tunisie Micro Informatique is working in partnership with a Libyan company and the Americans Oracle and Sun to establish an information technology group there. With a plan to build 250,000 housing units and a great number of hotels, Libya is seen by Tunisian construction firms as a great potential for investment.

© The North Africa Journal 2005