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Facing Uncertainty, Middle Eastern M&A Transactions Sag In Q2

By FactSet. Originally published at ValueWalk.

Over the past year, political and economic uncertainty has affected most markets, and M&A deals in the Middle East are no exception. Such deals are sensitive to turbulence, which leads to indecision from corporations in pursuing their acquisition plans. Deals are also taking longer to complete, which is reflected in a lower number of M&A transactions for Q2 2017 compared to the same quarter one year ago.

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For the quarter, the Middle East region closed 50 transactions, including both outbound and inbound deals, 36% below Q2 2016. The value of those completed deals was $6.7 billion, down about 21% from last year. Based on the number of transactions, the second quarter was better than the first, with transactions up by 61%. However, the total transaction value was 57% higher in Q1’17 compared to Q2’17.

In the second quarter, the sector registering the highest value was energy minerals with $5.1 billion across three deals. These three transactions represented 77% of the total transaction volume for Q2 2017. Last quarter, the finance sector led M&A activity with four transactions totaling $12,914 million.

Topping the list of the largest deals announced in Q2 2017 were:

  • A private group, led by Macquarie Infrastructure & Real Assets Ltd, BC Investment Management Corp, AMP Capital Holdings Ltd, and Qatar Investment Authority, acquired a 50.4% majority stake in Endeavour Energy Ltd from the State of New South Wales for $5.6 billion via auction.
  • Saudi Refining Inc., a wholly-owned subsidiary of state-owned Saudi Arabian Oil Co., acquired the remaining 50% minority stake not yet owned in Motiva Enterprises LLC from Royal Dutch Shell Plc for $700 million in cash and $1.5 billion in assumed liabilities.
  • A private group, led by One Foods Holding Ltd, a subsidiary of BRF SA, and Qatar Investment Authority, acquired a 79.5% majority stake in Banvit Bandirma Vitaminli Yem Sanayii ve Ticaret AS from Gorener and Kocman families (63.2%) and Aabar Investments PJS (16.3%) for $270 million.
Number Of Deals   Aggregated Value ($ MM)
Deal Size Q1 2017 Q2 2017   Q1 2017 Q2 2017
$ 1 Billion + 1 2  $           12,291.10  $            5,157.00
$ 500 M to $ 999.99 M 1 0  $                 560.32  $                         -
$ 250 M to $ 499.99 M 4 2  $             1,776.43  $               627.42
$ 100 M to $ 249.99 M 2 3  $                 240.09  $               685.01
$ 50 M to $ 99.99 M 0 1  $                          -  $                  69.60
$ 25 M to $ 49.99 M 1 3  $                   31.00  $               115.65
$ 10 M to $ 24.99 M 2 3  $                   31.31  $                  52.87
Under $ 10 M 1 8  $                      0.54  $                  33.48
Undisclosed 19 28  $                          -  $                         -
Total 31 50    $      14,930.79  $      6,741.03

Sector Activity and Value

Target FactSet Sector Q1 2017 Transaction Value (MM) Q2 2017 Transaction Value (MM) Q1 2017 No. of Transactions Q2 2017 No. of Transactions
Energy Minerals - 5,157.00 1 3
Finance 12,914.74 532.14 4 9
Consumer Durables - 357.42 - 3
Process Industries - 279.00 2 3
Distribution Services - 231.69 - 4
Technology Services 17.59 70.59 3 6
Commercial Services 367.80 49.95 6 6
Industrial Services 13.72 29.10 2 2
Retail Trade 106.61 22.87 2 2
Transportation - 6.00 - 5
Consumer Services 485.00 5.20 2 1
Health Services 560.32 0.07 1 1
Health Technology - - 1 1
Non-Energy Minerals 300.54 - 2 1
Producer Manufacturing 133.48 - 2 2
Utilities 31.00 - 1 1
Total 14,930.79 6,741.03 29.00 50

Inbound Transactions

In the second quarter, inbound transactions (where the acquirer and the acquired company were both based in the Middle East) represented 42% of total transactions. Of the companies acquired, 43% were based in the UAE, followed by Saudi Arabia with 14%, and Oman with 10%.

The sector registering the largest share of the total transaction value was commercial services with 50% of the transaction value across four transactions, followed by industrial services with 29.1% and retail trade with 22.9%.

Middle Eastern M&A Transactions

Topping the list of the largest inbound deals announced in Q2 2017:

  • Al-Baha Investment & Development Co acquired Al Marakiz Al Raqiyah Ltd for $38.7 million in stock. Under the terms of the agreement, Al-Baha Investment & Development Co issued 14.5 million shares to Al Marakiz Al Raqiyah Ltd upon which, its shareholders will own 49.15% stake in Al-Baha Investment & Development Co. Al Marakiz Al Raqiyah Ltd is located in Saudi Arabia and operates shopping malls.
  • Qurain Petrochemical Industries Co KSC acquired an additional 20.5% minority stake in National Petroleum Services Co for $29.1 million via, tender offer. Under the terms of the transaction, Qurain Petrochemical Industries Co KSC paid US$2.61 per share for every target share sought. The acquisition allows Qurain Petrochemical Industries Co KSC to enhance its oil and gas investment portfolio. Following the acquisition, Qurain Petrochemical Industries Co KSC increased its stake to 71.03% in National Petroleum Services Co. National Petroleum Services Co is located in Ahmadi, Kuwait and explores for oil and gas.
  • Evolvence Knowledge Investments Ltd acquired a 60% majority stake in Cheeky Monkeys Playland from Marka PJSC for $22.9 million. The acquisition allows Marka to secure its return gross in the original equity invested previously in Cheeky Monkeys. The transaction was approved by the Marka board of directors. Cheeky Monkeys Playland is located in Dubai, Abu Dhabi, United Arab Emirates and provides play station services for children.

Outbound Transactions

This quarter, outbound transactions represented 57% of total transactions.

Middle Eastern M&A Transactions

Topping the list of the largest outbound deals announced in Q2 2017:

  • A private group, led by Macquarie Infrastructure & Real Assets Ltd, BC Investment Management Corp, AMP Capital Holdings Ltd, and Qatar Investment Authority, acquired a 50.4% majority stake in Endeavour Energy Ltd from the State of New South Wales for $5.6 billion via auction. Following the acquisition, the State of New South Wales will hold the remaining 49.6%. The transaction received all necessary regulatory clearances from the ACCC and the ATO, and has been approved by the Federal Treasurer following advice from the Foreign Investment Review Board. Endeavour Energy Ltd is a company based in Australia that engages in oil and natural gas production activities in Indonesia. Previously, on January 26, several bidder groups along with Advance Energy were rumored to have submitted bids to acquire 50.4% stake in Endeavour Energy Ltd for a reported amount of $2.9 billion.
  • Saudi Refining Inc., a wholly-owned subsidiary of state-owned Saudi Arabian Oil Co, acquired the remaining 50% minority stake not yet owned in Motiva Enterprises LLC from Royal Dutch Shell Plc for $700 million in cash and US$1.5 billion in assumed liabilities, subject to adjustments. Motiva Enterprises LLC is a 50-50 joint venture between Royal Dutch Shell Plc and Saudi Arabian Oil Co. Under the terms of the agreement, Saudi Refining Inc. would make a payment of $2.2 billion to be used to assume

    The post Facing Uncertainty, Middle Eastern M&A Transactions Sag In Q2 appeared first on ValueWalk.

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