UAE-based firms largest acquirers in region

UAE-based entities were the largest acquirers in the Middle East in the year to date, closing deals worth $13.4 billion (Dh49.21bn), or 48.5 per cent of all buys made by the region's companies, according to the Thomson Reuters investment banking league tables for the region launched yesterday.

The largest of these deals was Abu Dhabi-based Aabar Investments' acquisition of a 9.1 per cent stake in German carmaker Daimler for $2.66bn, the data show. Aabar bought 96.4 million new shares in the Stuttgart-based company for €20.27 apiece in March.

"A lot of the activity is coming from the sovereign sector, which is making acquisitions that align with their strategic aspirations," Mark Jackson, Thomson Reuters' Head of Investment and Advisory for the Middle East and Africa, told Emirates Business in a telephone interview.

There is a strong pipeline of deals expected to close in the fourth quarter. Among deals announced but not yet closed is the $3.9bn acquisition of Singapore's Chartered Semiconductor by Abu Dhabi-based Advanced Technology Investment Company, which is also the main shareholder in Globalfoundries, a joint venture with US-based Advanced Micro Devices.

Asked to put a value to a full-year estimate of acquisitions by UAE entities, Jackson said: "Impossible to predict. Investment banks are hoping all these transactions will close."

With money managers and investors shunning volatile stocks in the financial crisis, debt issues and restructuring have taken the lead in the Middle East financial markets.

Mergers and acquisitions activity in the region since January 1 this year clocked in at $5bn, a drop of 70 per cent compared to the first nine months of 2008. Similarly, regional equity issuance dropped 86 per cent to $4.7bn, debt issuance was up 43 per cent at $21.8bn and loans decreased by 82.5 per cent to $13.6bn, according to the data released by Thomson Reuters.

This has come as a blow to investment banks and advisory firms, whose fee income dipped 57 per cent to a total of $431 million in the year-to-date compared with the same period last year.

"It has been a tough year so far both regionally and internationally for investment banks and financial advisers," said Basil Moftah, Managing Director of Thomson Reuters, Middle East and Africa. "While there have been encouraging signs in the region's debt markets, it remains to be seen if there is sufficient confidence in talk of recovery to re-ignite the Middle East equity offering and loan markets which are witnessing dramatic declines so far this year compared with 2008."

Thomson Reuters yesterday released the first in a new series of quarterly analytical reviews which examine the performance of the Middle East investment banking industry in the region's debt and equity capital markets, both conventional and Islamic. The review includes dedicated regional rankings of banks and advisors operating in the Middle East based on their deals and fees.

In a tight market, the rankings show HSBC holding the top spot in both the Middle Eastern debt and equity capital market fee rankings, with $13m and $11.5m respectively. Morgan Stanley comes first in the mergers and acquisitions fee rankings with $19.2m while Calyon tops the syndicated loan fee ranking with $9.5m.

Middle East debt issuance at $21.8bn is up from $15.2bn in the same period last year. Agency, supranational and sovereign issues account for 35 per cent of the activity with $7.6bn while investment grade corporate issues account for 65 per cent with $14bn. Islamic debt issuance reached $9.7bn with 27 issues – down 61 per cent compared with 2008.

The top Islamic debt issuer is Malaysia with 45 per cent of the activity, with Saudi Arabia coming in second with 21.5 per cent. Financials, energy and power, governments and agencies are the most active industries with 36.5, 30 and 28.5 per cent respectively.

Rothschild tops the M&A financial advisor Middle East rankings based on deal values with $15.39bn. Deutsche Bank came second with $15.31bn. The top Middle East targeted deal for 2009 was France Telecom's $716m acquisition of MobiNil Telecommunications. The top Middle East acquisition of the year worth $9.5bn was Qatar Investment Authority's acquisition in Volkswagen.

The most targeted M&A sector in the Middle East was financials with $2bn, 39.4 per cent of the activity. However, this is down from $4.69bn when compared with the first three quarters of last year. Kuwait is the most acquired Middle East country with $2bn, or 41.5 per cent of the activity. The most acquisitive Middle East country is the UAE with 48.5 per cent.

Equity issuance in the Middle East so far this year has reached $4.7bn – down 86 per cent year-on-year. Follow-ons, or secondary offerings, are the most active issue type with $2.7bn, or more than 57.9 per cent of the activity. Financials was the most active industry in the Middle East with 42.5 per cent of the activity. Telecommunications and energy andpower come second and third.

HSBC, Saudi Hollandi Bank and Qatar National Bank come first, second and third respectively in the Middle Eastern equity capital market ranking based on deal values. The largest equity issue so far was the Gulf Bank secondary issue worth $1.3bn.

In the Islamic finance space, the Thomson Reuters quarterly series looks beyond Middle East to assess the strength of the market globally. In this first publication, the data shows the Islamic debt capital market volumes and values witnessing major declines from their peaks of 2007 and 2008.

AmInvestment Bank Group tops the Islamic-financed bond ranking based on deal values with six issues worth $1.8bn. The top Middle East bond was issued by Qatar and was worth $2.9bn. Al Rajhi Banking & Investment Corp of Saudi Arabia, Calyon and Banque Saudi Fransi all rank first in the Islamic loan ranking with $833.3m each due to their work as bookrunners on the Zain loan of $2.5bn.

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