20110804_zr_090122
TRANSCRIPT
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MENA M&A Report: 1H2011 Update Page 1
MENA M&A Report: 1H2011 Update:
Shrugging off the effects of the Arab Spring
Michel El Maalouly
Mergers & Acquisitions Analyst
Nadine Sharrouf
Mergers & Acquisitions Analyst
July 2011
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MENA M&A Report: 1H2011 Update Page 2
Executive Summary
M&A volume increased 33.07% from 1H2010 to 1H2011.
M&A deal value reached USD21.17 billion in 1H2011, an increase of 30.14% compared to
the same period last year.
Tunisia marked the highest targeted M&A deal value in the first half of 2011 with a total of
USD2.14 billion, compared to Qatar with USD5.624 billion in 1H2010.
UAE topped deal volume with 32 deals in 1H2011, compared to Jordan’s 22 deals in
1H2010.
Outbound M&A deal value amounted to USD12.48 billion in 1H2011, an increase of
176.68% compared to 1H2010.
Targeted M&A deal value in the MENA region dropped from USD10.53 billion in 1H2010
to USD9.118 billion in 1H2011. The decrease was offset by a surge in M&A proceeds from
Tunisia, Lebanon and Morocco.
The financial services, industrial manufacturing and real estate sectors dominated the charts
in terms of volume in targeted sectors in both 1H2010 and 1H2011. Oil and gas topped the
charts by value, with USD6 billion in 1H2011, compared to real estate’s USD4.7 billion in
1H2010.
Information and data in this report is as of June 30, 2011.
Information is based on in process, confirmed and completed M&A deals only.
The Middle East and North Africa countries in this report include: Bahrain, Egypt, Jordan, Kingdom of
Saudi Arabia, Kuwait, Lebanon, Morocco, Oman, Palestine Territories, Qatar, Syria, Tunisia and
United Arab Emirates.
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MENA M&A Report: 1H2011 Update Page 3
I-Volume vs. Value Analysis
Mergers and acquisitions activity increased in the Middle East and North Africa in the first six
months of 2011, shrugging off the effects of political turmoil in the region.
The six months to June 2011 witnessed 173 deals, an increase of 33.07% over the 130 deals
closed in the same period of 2010, which is higher than the results forecasted in “The M&A
Barometer – Special Situation Update” from Zawya and M: Communications.
February 2011 was the most productive month in 1H2011 with 30 transactions totaling USD5.78
billion. This eclipsed January 2010’s 13 transactions with a total value of USD5.05 billion. In
terms of deal value, M&A activity increased 30.14% in 1H2011 to USD21.17 billion compared to
USD16.26 billion in 1H2010.
The largest M&A transaction in 1H2011 was worth USD5.06 billion when Abu Dhabi-based
International Petroleum Investment Company acquired an incremental 48.9% equity stake in
Spain’s Compania Espanola de Petroleos SA, or Cepsa. This eclipsed the largest deal of 1H2010,
which was between Ezdan Real Estate Company and International Housing Company, marking a
USD3.33 billion deal value in return for a 100% equity stake in IHC.
One of the most prominent events of the first half of 2011 was the cancellation of Emirates
Telecommunications Company, or Etisalat’s, acquisition of a 46% stake in Zain Group for a
staggering USD12.09 billion, the largest M&A deal in the MENA region. The cancellation was in
line with the political turmoil and a lack of consensus between Zain shareholders. The fact that
Zain owns 25% of Zain Saudi Arabia was also a sticking point, as Etisalat already operates in
Saudi Arabia through its 27.4%-owned Mobily, an issue that concerned local regulators. The
issue was to be resolved as Kingdom Holding Company has made a joint offer with Batelco to
acquire the 25% equity stake in Zain Saudi Arabia for USD1.2 billion.
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MENA M&A Report: 1H2011 Update Page 4
The average deal value in 1H2011 amounted to USD 122.37 million per deal with May and June
holding the lead in terms of volume for the first half with 32 deals
The average deal value in 1H2010 amounted to USD125.13 million per deal, with June marking
the highest volume for the first half with 33 deals.
I-Volume vs. Value Analysis
4,000.67
5780.56
3,759.85
661.30
2,239.22
4,729.00
2930
25
25
32
32
0
5
10
15
20
25
30
35
0.00
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
7,000.00
January February March April May June
Value in USD m
Volume
Volume Vs. Value - 1H 2011Volume vs. Value - 1H 2011
5,044.51
406.86790.84
4,438.86
3,852.16
1,733.771317
24
23
20
33
0
5
10
15
20
25
30
35
0.00
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
January February March April May June
Value in USD m
Volume
Volume vs. Value - 1H 2010
Source: Zawya
Source: Zawya
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MENA M&A Report: 1H2011 Update Page 5
II-Geographic Location Analysis
Putting all effects of the Arab Spring aside, Tunisia witnessed the largest average deal value of
USD535 million in the first half of 2011, with four deals totaling USD2.14 billion. The deals
with a significant effect on the average were:
1. OMV (Tunesian) Production Gmbh acquired Pioneer Natural Resources Anaguid and
Pioneer Natural Resources Tunisia for a total consideration of USD865.7 million.
2. National Mobile Telecommunication Company and Princesse Holding acquired of a 50%
stake in Orascom Telecom Tunisie for approximately USD1.2 billion.
In comparison, Qatar scored the highest average value per deal in 1H2010 with USD937.4
million from six deals valued at USD5.6 billion.
2064.99
1709.87
258.5
566.34478.8
743.23
24.42
173.08
2140
127.04
995.42
10.13
0
32
2421
14 14
106
54 4
3 3
10
5
10
15
20
25
30
35
0
500
1000
1500
2000
2500
M&A Target Geographic Analysis - 1H2011
Value in USD m
Volume
Source: Zawya
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MENA M&A Report: 1H2011 Update Page 6
However, UAE took first place as a target country in terms of deal volume, with 32 deals in
1H2011, compared to nine in 1H2010, a remarkable increase of 255.5%. Eight of the 32 were
inbound transactions, as investors were located outside the region. The highest inbound deal
value in UAE was Tyco International and REF Holdings acquisition that amounted to USD300
million. Following Tunisia, UAE targeted deal values amounted to USD2.07 billion in 1H2011,
compared to USD633.91 million in 1H2010, an increase of 225.75%.
Saudi Arabia, banking on a solid economy, saw the number of deals increase by 118.18% from
11 in 1H2010 to 24 in 1H2011. Deal value in Saudi Arabia scored a 265.5% increase from
USD467.2 million in 1H2010 to USD1.71 billion in 1H2011. There were only four external
investors, with 20 being regional and domestic players. This clearly demonstrates a huge
appetite within the region to invest in Saudi Arabia.
724.98
692.82866.47
674.5467.82
633.91
5624.43
83.92 0.75
610.7129.3 28.72
0
22
1815
15
11
9
63 3
2 22
0 0
5
10
15
20
25
0
1000
2000
3000
4000
5000
6000
M&A Target Geographic Analysis - 1H2010
Value in USD m
Volume
II-Geographic Location Analysis
Source: Zawya
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MENA M&A Report: 1H2011 Update Page 7
II-Geographic Location Analysis
9909.7
621.82
5735.47
7616.86
1071.44
12484.3
0
2000
4000
6000
8000
10000
12000
14000
Domestic Inbound Outbound
Deal Location Analysis in USD m
1H2010
1H2011
107
3
20
120
2330
0
20
40
60
80
100
120
140
Domestic Inbound Outbound
Deal Location Analysis by Volume
1H2010
1H2011
Source: Zawya
Source: Zawya
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MENA M&A Report: 1H2011 Update Page 8
M&A activity is surging in non-GCC countries with Tunisia, Lebanon and Morocco being the
main drivers. The total targeted value of M&A activity in the MENA region during 1H2011
scored USD9.29 billion, out of which the GCC countries contributed 56.29% for a total of
USD5.23 billion. Comparatively, 1H2010 logged USD10.53 billion, out of which the Gulf
nations contributed USD8.35 billion, or 79.25%.
GCC vs. MENA
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MENA M&A Report: 1H2011 Update Page 9
III-Sector Analysis
The sectors targeted by investors saw little change from 1H2010 to 1H2011 with financial
services, industrial manufacturing and real estate topping the charts.
In 1H2010, financial services constituted approximately a quarter of the total value, representing
25.56%. In 1H2011, the sector showed a minor decline to 24.43% of the total. On the other hand,
the industrial manufacturing sector’s share increased from 12.78% in 1H2010 to 14.20% in
1H2011.
Sector 1H2010 Sector 1H2011
Financial Services 25.56% Financial Services 24.43%
Industrial
Manufacturing 12.78%
Industrial
Manufacturing 14.20%
Real Estate 11.28% Real Estate 9.09%
Health Care 7.52% Construction 5.68%
Telecommunications 6.77% Media 4.55%
Source: Zawya
These five sectors constituted more than 50% of the total targeted sectors in the MENA region.
On the other hand, sectors that witnessed the highest deal values differed from 1H2010 to
1H2011. While real estate dominated the charts in 1H2010 with a total of USD4.72 billion, oil
and gas showed the highest value of USD5.95 billion in 1H2011. The largest M&A deal in real
estate during 1H2010 was Ezdan Real Estate Company and International Housing Company
totaling to USD3.33 billion. The second largest M&A transaction in real estate in 1H2010 was
Barwa Real Estate Company and Qatar Real Estate Investment Company acquisition valued at
USD898.08 million.
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MENA M&A Report: 1H2011 Update Page 10
The largest deal by value in the oil and gas sector in 1H2011 was International Petroleum
Investment Company and Compania Espanola de Petroleos SA that exceeded USD5 billion.
The second largest sector in 1H2010 was the retail sector with a total of more than USD2.24
billion. The sale of Harrods to Qatar Holding alone was valued at USD2.2 billion.
The second largest M&A sector in 1H2011 was financial services with a total value of USD3.86
billion. Aabar Investments’ deal for the acquisition of 24.90% equity stake in Malaysia’s RHB
Capital from Abu Dhabi Commercial Bank is the largest deal value at USD1.94 billion.
III-Sector Analysis
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MENA M&A Report: 1H2011 Update Page 11
III- Sector Analysis III- Sector Analysis III-Sector Analysis
Retail, 2.84%
Education, 0.57%
Transport, 5.11%
Services, 3.98%Information Tech.,
2.27% Agriculture,
0.57%
Mining & Metals,
2.27%Media, 4.55%
Food & Beverage,
2.84%
Leisure and Tourism,
2.27%
Construction, 5.68%
Real Estate, 9.09%
Ind. Manufacturing,
14.20%
Health Care, 5.11%
Consumer Goods,
3.41%Telecommunication,
5.11%
Power and Utilites,
2.27%
Financial Services,
24.43%
Oil & Gas, 3.41%
Sector Analysis - 1H2011
002.84.95.656.45102.07118.2130.04189.83
397.53873.62
1020.561201.9
16952570.04
2969.753861.03
5959.81
0 2000 4000 6000 8000
RetailEducationTransport
ServicesInformation Tech.
AgricultureMining & Metals
MediaFood & Beverage
Leisure and TourismConstruction
Real EstateInd. Manufacturing
Health CareConsumer Goods
TelecommunicationPower and UtilitesFinancial Services
Oil & Gas
Value/Sector - 1H2011
Value/Sector in USD m
Source: Zawya
Source: Zawya
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MENA M&A Report: 1H2011 Update Page 12
Source: Zawya
Source: Zawya
Health Care, 7.52%Consumer Goods,
1.50% Information Tech.,
2.26%
Agriculture, 0.75%
Power and Utilites,
1.50%
Financial Services,
25.56%
Oil & Gas, 1.50%
Leisure and
Tourism,
3.01%Food & Beverage,
3.01%
Mining & Metals,
3.01%
Telecommunication,
6.77%
Ind. Manufacturing,
12.78%
Services, 5.26%
Transport, 4.51%
Media, 0.75%
Construction, 6.02%
Retail, 3.01% Real Estate, 11.28%
Sector Analysis - 1H2010
III-Sector Analysis
14.0320.12224.546.860.1113.54
400.61470.106536.16
663.38855.5876.01
1041.562020
2172.192240
4721.5
0 1000 2000 3000 4000 5000
Media
Consumer Goods
Information Tech.
Agriculture
Power and Utilites
Health Care
Oil & Gas
Leisure and Tourism
Food & Beverage
Mining & Metals
Telecommunication
Ind. Manufacturing
Services
Transport
Financial Services
Construction
Retail
Real Estate
Value/Sector - 1H2010
Value/Sector in USD m
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MENA M&A Report: 1H2011 Update Page 13
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MENA M&A Report: 1H2011 Update Page 14
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