Kuwait: SIG Combibloc claimed the top spot among GCC mergers and acquisitions (M&A) transactions during Q4 2020 as per a report recently issued by the Investment Banking Department at Kuwait Financial Centre “Markaz”. The report highlights the USD 571.0 million transaction through which the Swiss packaging company will acquire a 50% stake in SIG Combibloc Obeikan, a joint venture it established alongside Obeikan Investment Group. Upon the successful closing of the transaction, SIG Combibloc will retain full ownership of the venture.

Gulf Insurance Group rounded in the second-largest transaction with its announcement to acquire AXA’s Gulf-based insurance operations for a total consideration of USD 474.8 million. As part of this transaction, the group will acquire the following stakes from AXA S.A. and Yusuf Bin Ahmad Kanoo Group AXA Gulf (100%), AXA Cooperative Insurance Company (50%) and AXA Green Crescent Insurance Company (28%).

The third biggest transaction oversaw National Central Cooling Company acquire 100% of Saadiyat Cooling LLC and Saadiyat District Cooling Sole Proprietorship for a total consideration of USD 262.2 million. Collectively, these two companies have the capacity to generate 88,000 refrigeration tonnes. Moreover, Saudi Telecom Company announced the signing of an agreement with Western Union Company to sell a 15% stake in its wholly-owned subsidiary, Saudi Digital Payments Company, for a total value of USD 200.0 million. Lastly, Agthia Group has announced that it has received an offer from General Holding Company (“Senaat”) to combine its subsidiary, Al Foah Company LLC (“Al Foah”), with Agthia Group. The key terms state that Senaat will transfer Al Foah to Agthia Group in exchange for the issuance of a convertible instrument valued at USD 122.5 million.

GCC M&A Growth

According to Markaz’s report, the total number of GCC M&A transactions that closed during Q4 2020 increased by 200%, relative to Q4 2019, and 57% relative to Q3 2020. Apart from Oman and Qatar, each of the remaining markets recorded a growth in the number of closed transactions compared to the previous quarter.

Acquirers and Targets

The majority of transactions closed during Q4 2020 and Q3 2020 were carried out by GCC acquirers. Of the total number of closed transactions during Q4 2020, GCC acquirers accounted for 81% while foreign acquirers accounted for 11%. 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 65% of the total number of closed transactions while foreign acquirers accounted for 13%. Meanwhile, the remaining 22% represents transactions for which the buyer information was not available.

Furthermore, GCC acquirers actively acquired both local and international companies whereas they shied away from acquiring regional companies, except for the UAE. Throughout Q4 2020, GCC acquirers closed a total of 27 transactions within their local markets, compared to 14 transactions in Q3 2020, and 10 cross-border transactions, which is slightly less than the number of cross-border transactions that closed in Q3 2020.*

It is worth noting that UAE and Bahraini buyers accounted for 50% and 20% of the cross-border activity (closed), respectively, followed by Omani, Qatari and Saudi buyers, whom accounted for the remainder of the transactions. Lastly, Kuwaiti buyers did not close any cross-border transaction.

*Local transactions refer to those whereby a GCC buyer acquires a target within their respective country (i.e. Kuwaiti buyer acquirers Kuwaiti companies, Saudi acquirer acquires Saudi company, etc.)

Foreign Buyers

The GCC market received a slightly greater level of interest from foreign buyers in Q4 2020 when compared to the previous quarter. Throughout Q4 2020, foreign buyers closed four transactions, whereas in Q3 2020, they completed three transactions. The total remains far behind the level of foreign activity recorded in Q4 2019. This is primarily driven by the uncertainty hovering around the GCC markets and the prevailing fear that was onset due to the spread of the COVID-19 virus and its underlying impact on oil prices. As most GCC economies are dependent on oil and natural gas, many foreign players were hesitant to invest in the region without any outlook as to where the oil and gas industry was headed.

Moreover, the UAE continues to be one of the most attractive markets relative to its peers, however this time around, Saudi Arabia proved to be a competitive market as well after ending the previous quarter with zero transactions. Neither of the remaining GCC countries recorded any closed foreign buyer deals throughout the quarter. It is worth noting that neither Kuwait, Oman nor Qatar have recorded any transactions throughout the past three consecutive quarters.

Sectorial View

Further, the transactions that closed throughout the quarter spanned across multiple sectors, a trend that has persisted through the past few quarters. With that being said, the sectors witnessing the greatest level of activity throughout Q4 2020 were the Consumer Discretionary, Education, Financials and Industrials sectors. Collectively, these four sectors accounted for greater than 55% of the total closed transactions throughout the quarter. In addition, the Financials and Industrials sectors have been among the sectors witnessing the greatest level of activity throughout the past two consecutive quarters.

Deals Pipeline

By the end of Q4 2020, there was a total of 26 announced transactions in the pipeline, which is slightly higher than Q3 2020, during which 23 transactions were announced. The majority of these transactions involved Saudi and UAE targets, each of whom accounted for 42% of the total number of announced deals. The remaining transactions primarily included Omani, Bahraini, and Kuwaiti targets while Qatar announced no transactions. Oman, Saudi Arabia and the UAE were the only markets to witness a slight growth in activity, whereas the remaining market recorded zero to negative growth.

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