Several high-value mergers or acquisitions are expected to take place in the Middle East and North Africa before the end of the year, ending a dismal 12 months of deal making in the region, according to an international report.
Deal volumes have fallen each of the past four quarters, with only one notable merger during Q3 2013.
That was the joining of Dubai Aluminum and Emirates Aluminum, creating Emirates Global Aluminium, a $15bn joint-venture between Abu Dhabi’s Mubadala Development Company and Dubai’s Investment Corporation of Dubai.
According to Allen & Overy, a UK-based law firm, other MENA deals continued to be driven by inbound acquisition in Saudi Arabia and Kuwait.
“Ironically, the sale of a minority stake was one of the largest completed transactions whose value was made public – the sale of 38 percent of Saudi’s Alessa Industries to Aseer Trading, Tourism & Manufacturing Company for $151m,” the report says.
The industrial sector continued to show strength, while bank deals declined after driving much of the region’s recent activity.
However, the report says the future is looking more promising for mergers and acquisitions, with several deals expected to be closed by the end of the year.
“Current indicators paint a bleak picture of the environment for deal making throughout the MENA region,” the report says.
“But spirits have been buoyed by several announced deals which provide hope that capital reserves and strategic opportunities will meet to fuel increased activity before year-end, primarily driven by large potential transactions.
“With its rapidly growing population attracting continued strong interest amongst trade buyers and financial investors, the region could see a flurry of activity in Q4 – not unusual as businesses seek to beat the year-end with value accretive acquisitions.”
The analysis expects the oil and gas, telecoms and banking industries to be particularly active, while “robust” fundamentals in developed businesses attract strategic buyers with cash reserves.
The deals expected to be completed by December include UAE telecom giant Etisalat’s binding offer to buy Vivendi’s 53 percent stake in Morocco’s Maroc Telecom for $5.27bn, continuing a regional trend in consolidating the telecoms sector.
Apache Corporation also has announced a global strategic upstream oil and gas partnership with China’s Sinopec.
Initially, Apache Corporation will receive $3.1bn in cash in exchange for Sinopec gaining a 33 percent minority stake in Apache Corporation’s Egyptian oil and gas business.
Al Salam Bank-Bahrain is expected to complete its acquisition of BMI Bank from BankMuscat SAOG, leading significant activity in the banking sector.
“To balance the optimism, continued regional tensions and an expected decline in oil prices may result in regional businesses becoming more cautious,” the report also warns.
“However, while these uncertainties may deter some, they may also create opportunities for trade and investors willing to embrace risk in their search for attractive values.”
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