20110804_zr_090122

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

[email protected]

Nadine Sharrouf

Mergers & Acquisitions Analyst

[email protected]

July 2011


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.


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.

http://www.zawya.com/middle-east/mergers-acquisitions/

http://www.zawya.com/viewpdfStory.cfm/sidpdf_180311103606/lok1

http://www.zawya.com/middle-east/mergers-acquisitions/dealProfile.cfm/did11041802221692

http://www.zawya.com/middle-east/mergers-acquisitions/dealProfile.cfm/did11041802221692


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


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


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


Source: Zawya



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


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


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.


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


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


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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