Mergers and acquisitions (M&A) in the Middle East and North Africa (MENA) region registered recorded 25 deals worth $1.5 billion during October 2008, Kuwait Financial Centre (Markaz) reported on Monday. As the financial markets are being subjected to the volatile and uncertain environment, M&A activity in the region continued to show signs of momentum, as consolidation is picking up across sectors especially the financial services sector. This, coupled with falling share prices, are leading to strategic acquisitions more attractive. The financial services and the investment services sector dominated the M&A activity in the region. The sectors, together contributing to a deal value of $521.9 million, formed almost one-third of the total M&A deals during the month, Markaz said in a report sent to the Saudi Gazette. The total regional M&A deal value of $1.5 billion does not reflect the actual value which may be higher, as values for deal values relating to certain sectors such as the communications, F&B, O&G, and stock exchange services were not reported. The key deals during the month were as follows: • The largest transaction by value involved Abraaj Capital Ltd. acquiring 50 percent stake in Pakistan-based KES Power Ltd., with majority ownership of 71.5 percent in Karachi Electric Supply Co (KES) for $400 million. KES was privatized in November 2005 with the transfer of 73 percent of the government's shares to a consortium of investors led by KES Power, KSA based Al-Jomaih Group (60 percent) and Kuwait based National Industries Holding (40 percent). • International Investment Projects Co. (IIPC) was liquidated and merged into Al-Deera Holding Co. on the basis of a share swap of 2.7 of its shares with one share of Al-Deera. The swap was based on fair values (FV) of the two companies set with Al-Deera at KWD176 million and with that of IIPC at KWD73 million. After the merger, Al-Deera's capital is expected to be raised to KWD74 million issuing 219 million shares to IIPC's shareholders. • Douja Promotion Groupe Addoha SA (Douja), Morocco's largest property developer by market value ($4.5 billion), acquired two real estate companies (Citaf and Optim Inmobilire) from Fadesa Maroc (Fadesa), subsidiary of Spain-based Martinsa-Fadesa SA) for approximantely $213 million. In July 2008, Fadesa had filed for bankruptcy on account of debt amounting to about $6.9 billion. • GlaxoSmithKline plc (GSK) acquired the Egyptian mature products business of Bristol Myers Squibb (BMS) for $210 million, in a move to accelerate sales growth and further extend its portfolio in the emerging markets. The company has a current revenue market share of 44 percent; with sales in 2007 of $105.7 million. • Bahrain-based asset management firm Investcorp acquired a 38 percent stake in Redington Gulf, 100 percent-owned subsidiary of Redington India Ltd., an IT distributor listed in India and operating in India, South Asia, and the MENA for $98 million. Investcorp is to invest through its fund Gulf Opportunity Fund I. • Maximum numbers of acquirers during the month were international players primarily from Malaysia, UK, US, and France; followed by the UAE from government and financial services/banking sector. The UAE followed by KSA, Abu Dhabi, and Morocco were the key domestic acquirers. During October 2008, the highest volume of transactions was led by the investment services sector. It also contributed the highest transaction value of $456.9 million. • The Malaysian government investment holding arm Khazanah Nasional Bhd acquired a 10 percent stake in KSA-based Jadwa Investment (Jadwa) a Shariah- compliant investment company, for $75.7 million; whose key shareholders are leading Saudi business families and is chaired by Prince Faisal. As at FY2007, Jadwa had assets under management of $1.1 billion, with 2007 YTD revenues of $69.9 million and profit of $27.7 million. • UK-based asset management Company First London Securities (FL) acquired 100 percent of Bahrain Capital International (Bahrain Capital) – a provider of investment management and advisory services – i n exchange for 92.8 million new shares in a reverse takeover transaction. The shares were valued at BD26.9 million ($71.6 million), based on FL's closing price of BD0.291 ($0.77) on Oct. 21, the last trading day prior to the announcement of the transaction. These shares may only be disposed of for one year with the company's consent. The shareholders of Bahrain Capital were also expected to receive additional consideration should the total contribution to EBITDA of business be in excess of $12 million for any of the first (3) years after completion. The combined group has tangible net assets at closing was US cents/share. Bahrain Capital will contribute a minimum of $1.2 billion of gross assets under management to the business and appoint two members to the board of First London PLC. • NCB Capital (NCBC), the investment banking arm of National Commercial Bank (NCB), acquired The Capital Partnership (TCP), subsidiary of Capital Partnership (UK) Limited in order to expand its asset management specialization services. • French water and waste utilities Company Veolia Environment SA formed a JV with the investment arm of Abu Dhabi's Government Mubadala Development Co. The JV (51 percent by Veolia Water and 49 percent by Mubadala) is to support projects such as water treatment and desalination plants, against a backdrop of tight credit and volatile stock markets. The collaboration is an example of an emerging trend, of bringing together the expertise of technical partner in environmental services with the experience of a local investment and development company; to step up long term execution of ambitious projects for the two companies. “WWe believe more such partnerships are to emerge in the future; with many such key transactions that already occurred during the year. The key JVs being between Mubadala and Veolia Env., Masdar and WinWinD Oy, and contract won by Singapore based Hyflux to build a desalination plant in Algeria. • Egyptian investment bank Pioneers Holding signed an agreement to acquire 50 percent of Egyptian Securities Brokerage. The key deals in thefinancial services/banking sector were as follows: • Banque Centrale Populaire (BCP), the Moroccan bank with majority Government ownership, acquired a 50.1 percent stake in the Moroccan investment bank Upline Group (Upline) by acquiring buy new and existing shares. BCP plans to merge Upline Group with its affiliates (Al Istitmar Chaabi mangement funds, Al Wassit brokerage and Mediafinance retail banking), to create the investment banking arm of its investment and retail banking arm and then turn Upline into its investment banking subsidiary. Upline's key shareholders are Jalal Houti and its two founders each owning 34 percent, its Palestinian partners owning 10 percent and the rest owned by Morocco's royal family. (Details of transaction not available) • JCB Company (JCB). in collaboration with ORIX Corporation (ORIX) and Majid Al Futtaim Group (MAF Group), formed a JV (MAF:60 percent, Orix: 30 percent, and JCB: 10 percent) credit card company Majid Al Futtaim JCB Finance LLC (MAF JCB), based in Dubai; with a capital of AED60 million. Benefiting from JCB's credit card business expertise and ORIX's experience in international finance, JCB aims to promote license partners throughout the MENA region. • Dubai Investments PJSC, acquired a 5 percent stake (50 million shares) in First Energy Bank, Sharia-------------compliant Bank focused on investment services in the energy sector; for $65 million. The key deals in the real estate/construction sector were as follows: • UAE-based Al Batha Group with diversified business interests, acquired 40 percent of Malaysian-based real estate Company Bukit KiaraCapital Sdn Bhd (would retain 60 percent of the company), leading to a new Company under the name of AlBatha Bukit Kiara Holdings Sdn Bhd (ABBK) with the rationale being to undertake property developments in Malaysia and the UAE. (Details of transaction not available) • KSA-based Al-Rajhi Investment Group acquired a 70 percent stake of UAE-based design company Romeo Design LLC. Romeo Design has expanded their activities in the GCC region and is actively involved in the contracts furnishing market. The key deals in the industrial/manufacturing sector were as follows: • Belgium-based Solvay SA (Solvay) acquired 100 percent of Egyptian Company Alexandria Sodium Carbonate Company (ASCC) fromholding Company for Chemical Industries (HCCI), an Egyptian State-owned holding company for $128.5 million. Rationale of the acquisition was part of Solvay's geographical expansion strategy into tapping Egypt's domestic demand and to support projects MENA region. Solvay is considering increasing annual production capacity to 200,000mt of sodium carbonate; with long term estimates of 500,000T/year at the Alexandria plant. Till date, Solvay derived largest revenue contributions from Belgium and the EU. • UAE-based real estate company Hydra Properties LLC acquired a 47.4 percent stake, or 23.7 million shares, in an Ajman-based operator of fish farms, International Fish Farming Co PJSC (IFFC), for $193.7 million, in a privately negotiated transaction. (Based on 2007 Sales of $193.7 million, deal value transaction translated to price/sales multiple of about 8.4 times) • MAN AG, Europe's third-largest truckmaker, divested up to 70 percent stake of its Ferrostaal Industrial Services unit (designs oil and petrochemical plants and accounted for 9 percent of the Group's total revenue) to Abu Dhabi-based International Petroleum Investment Co. (IPIC); to concentrate on trucks. The rationale behind the initaitive is to focus on its trucks, diesel engines, and turbomachinery businesses. Another transaction by IPIC was in the O&G sector, with increased its stake in OMV AG, Central Europe's largest oil company, by 1.6 percent to 19.2 percent (now owns 57.5 million shares). __
