Dealmaking is up 145% in the sultanate
News of the global slump in mergers in acquisitions hasn’t reached the farthest corner of the Arabian Peninsula, where a string of potential $1 billion-plus energy deals is helping Oman defy the gloom.
The value of announced or proposed transactions involving an Omani target has risen 145% in the last 12 months, according to data compiled by Bloomberg. That compares with a 6% fall globally, owing to the impact of the coronavirus crisis.
And that doesn’t even include potential sales by BP Plc and Occidental Petroleum Corp. The western oil producers are both exploring divestments of more than $1 billion in Oman.
If these and further planned privatisations by the state are completed, it would make 2020 the best-ever year for deals involving targets in the oil-rich sultanate, the data shows.
While dealmaking in the Middle East has historically been driven by neighbouring Saudi Arabia and United Arab Emirates, activity in Oman has been given a lift by its rulers opting to sell state assets to reduce reliance on the bond markets and plug one of the largest budget deficits among oil exporters.
In December, State Grid Corp. of China agreed to acquire a 49% stake in Oman Electricity Transmission Co. in a deal valuing the power company at about $2 billion.
The sale marked the first major privatization by Oman and was also a sign of rising Chinese interest in the Middle East. Next on the auction block is a controlling interest in state-owned Muscat Electricity Distribution Co.
China Southern Power Grid Co. is among interested suitors that has been pursuing a stake in the business, people with knowledge of the matter said. A deal could value the Omani company at more than $1 billion, one of the people said, asking not to be identified because the information is private.
The next round of bids is due in the coming weeks, the people said. A representative for China Southern Power didn’t respond to multiple emails and phone calls seeking comment. Representatives for Muscat Electricity and its owner, Nama Holding, didn’t respond to requests for comment.
Oman is one of the smallest Arab nations by population. Bordered by Saudi Arabia, Yemen and the UAE, its natural resources include oil, natural gas, copper, limestone and gypsum. In April, Oman said it would combine its two sovereign wealth funds into one $17 billion entity to be managed by the Oman Investment Authority. All government companies, with the exception of Petroleum Development Oman and the nation’s international investments, will fall under the new entity.