The GCC market sealed a total of 128 mergers and acquisitions (M&A) in the first nine months (9M) of 2023, a decline of 22% year over year, according to a report.
The report issued by the Investment Banking Department at Kuwait Financial Centre (Markaz) said UAE claimed the lion’s share with 77 closed transactions, followed by Saudi Arabia closing a total of 30 transactions. Apart from Qatar and Saudi Arabia, all other markets in the region saw a substantial year-over-year decline in their M&A activities.
Q Holding leads the top GCC M&A transactions in 9M 2023. The report highlights the $7 billion transaction that was announced by the Emirati company whereby it revealed its plans to merge ADQ Real Estate and Hospitality Investments and IHC Capital Holding's entities, including Modon Properties, Abu Dhabi National Exhibition Company, and various other assets under the Q Holding umbrella.
Second-largest
Jazan Integrated Gasification and Power Company secured the second-largest transaction by finalising its acquisition of the Jazan Integrated Gasification Combined Cycle (IGCC) plant from Saudi Aramco, valued at $4.8 billion.
The acquisition was phased out with the first group of IGCC assets acquired for $7.2 billion on October 18, 2021 financed through senior debt facilities. The Saudi Public Investment Fund signed a binding agreement with Saudi Basic Industries Corporation to acquire the shares of Saudi Iron and Steel Company, for a total estimated enterprise value of $3.3 billion, with the final sales price to be disclosed as the closing date approaches.
Moreover, Brookfield Asset Management and the consortium of CVC Capital Partners Limited and Francisco Partners submitted substantial billion-dollar bids with intentions to acquire UAE's Network International. Initially, CVC Capital and Francisco Partners jointly presented a cash offer of 387 pence per share, totalling approximately $2.7 billion for the complete 100% ownership of Network International.
Brookfield offer
Subsequently, following this announcement, Canadian-based Brookfield Asset Management also submitted a non-binding offer to acquire the entire Network International at a rate of 400 pence per share, estimated to be around $2.7 billion. Lastly, Fairfax Financial Holding Company Limited announces intentions to acquire an additional 46.3% stake in Gulf Insurance Group for KD263.7 million ($858.4) from Kuwait Projects Company Holding. Post transaction, Fairfax will be the largest shareholder in Gulf Insurance Group owning approximately 90.0% of the company.
Acquirers and targets
Consistent with historical trends, the majority of transactions completed in both the initial nine months of 2023 and 2022 were carried out by acquirers from the GCC. Specifically, during the first nine months of 2023, GCC acquirers took the lead, being responsible for a substantial 73% of the total completed transactions, leaving foreign acquirers with a 27% share.
GCC acquirers also dominated the market during the initial three quarters of 2022 as they accounted for 71% of the total number of closed transactions with foreign counterparts contributing a noteworthy 24%. The residual 6% encompasses transactions for which the buyers remained undisclosed.
Furthermore, GCC acquirers primarily invested in companies within their local markets and in international markets, and targeted regional companies to a lesser extent. Through 9M 2023, GCC acquirers closed a total of 80 transactions within their local markets, compared to 99 transactions in 9M 2022.
In addition, GCC acquirers sealed 63 cross-border transactions throughout 9M 2023, relative to 64 cross-border transactions in 9M 2022. UAE buyers spearheaded the cross-border activity, representing approximately 60% of the total number of closed cross-border transactions, while Saudi Arabia and Qatar followed, contributing 19% and 13%, respectively.
Foreign buyers
Shifting focus, GCC targets experienced a slight decrease in foreign buyer interest during this period. They concluded a total of 34 transactions, which was marginally lower than the 39 transactions in the preceding year, marking a 13% year-over-year decline.
Notably, UAE targets continued to be the prime attraction for foreign buyers, finalising 25 transactions in the initial three quarters of 2023.
Sectoral view
Moreover, the deals concluded in the first three quarters of 2023 were directed towards companies spanning diverse sectors, emphasising a consistent trend observed in recent quarters.
That said, the Consumer Discretionary, Industrials, and Information Technology sectors stood out as the most active, collectively contributing to 37% of the transactions completed during this period.
Deals in the pipeline
By the end of the initial three quarters of 2023, there were a total of 81 announced transactions in the pipeline, marking a substantial reduction compared to the preceding year when the pipeline saw a total of 100 announced transactions.
The majority of these transactions involved UAE targets, who accounted for 40% of the total number of announced deals, followed by Saudi Arabia and Kuwait at 35% and 16%, respectively. The remaining transactions involved Omani, Qatari and Bahraini targets. Apart from Oman, all the other markets experienced a substantial reduction in activity compared to the same period in 2022.--TradeArabia News Service
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