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UAE firms ‘most targeted’ for M&A deals in October

In October, M&A activity targeting companies based in the Middle East had mixed fortunes in October as value surged while volume weakened.

The total value of M&A activity in the region up to October this year was $20.98 billion through 228 deals.

One deal topped the $1 billion mark in October, which was National Shipping Company of Saudi Arabia’s agreement to buy the fleet and business of Dubai-based crude oil tanker company Vela International Marine for $1.3 billion, accounting for 64 per cent of the overall total.

The second-highest transaction by value in October was Saudi Arabian diversified conglomerate Savola increasing its stake in Riyadh-headquartered dairy products business Almarai from 30 per cent to 37 per cent, in a deal worth $533 million.

These two deals collectively represented 91 per cent of the total value during the month under review, and no other transactions surpassed $100 million, the report said.

After the UAE, Saudi Arabia came second with $533 million ploughed into a total of three deals. Jordan followed with three deals worth $11 million, but this was a drop on last month’s figure of $47 million across 14 transactions, the report said.

In October, “a total of $2.017 billion was invested across 14 transactions, which in monetary terms was a significant increase on the $143 million recorded in September and also impressive compared with the same time last year when $536 million was recorded,” the report said, based on a database published by Bureau van Dijk.

However, volume was down by a hefty 58 per cent on September when 33 deals were signed off, and 44 per cent lower than 12 months ago when 25 transactions were announced, it said.

In 2011, the total number of merger and acquisition in the Middle East North Africa region rose just four per cent, from 401 in 2010 to 416 in 2011, according to Ernst and Young’s statistics.

Total deal values fell 28 per cent from $44.1 billion in 2010 to $31.7 billion in 2011.

August recorded the highest merger and acquisition value in 2012. The value of deals targeting companies based in the Middle East leapt to $6.57 billion in August, the highest since September 2008, and up 160 per cent on the $2.6 billion recorded in July.

According to Russell Haworth, managing director for the Middle East and North Africa at Thomson Reuters, during the first nine months of 2012, M&A activity posted the strongest growth since 2008 to cross $15 billion, which is more than double the activity seen during the same period in 2011 at $7.5 billion.

Telecoms were the most targeted industry in the Middle East with $6.4 billion. “The UAE was the most active Middle Eastern country with $4 billion of the total M&A activity so far during 2012,” he said.

According to a Barclays executive, M&A deals in the Middle East will probably rise in 2013 as sovereign wealth funds look for ways to spend cash from oil sales and regional companies seek expansion.

Another report from Deloitte also endorses the upswing in mergers and acquisitions in the GCC. The majority of M&A transactions over the past two years have concentrated on the GCC region, in particular the UAE and more recently Saudi Arabia Deloitte, a professional services firm, has observed in its report.

Deloitte said there are increasing signs that the more active funds in the region have begun to redirect their focus to target the wider Mena region including North Africa.

Analysts believe that several Middle East companies are becoming selectively active about acquisitions after absorbing the impact of the credit crisis. The largest Middle Eastern deal so far this year was Qtel’s $2.2 billion offer for the Kuwait-based telecommunications operator, Wataniya, in August.

issacjohn@khaleejtimes.com