Middle East merger and acquisition deals will probably rise in the next year as sovereign wealth funds look for ways to spend cash from oil sales and regional companies seek expansion, a Barclays Plc (BARC) executive said.
M&A activity is “picking up and our deal pipeline feels much better than two or three years ago,” Makram Azar, vice chairman of investment banking at Barclays, said in an interview at the bank’s Dubai offices on Aug. 30. Sovereign wealth funds “need to put their cash to work, particularly outside the region, in emerging and high growth markets or in opportunistic deals in Europe where valuations are depressed,” he said.
A total of 194 M&A deals worth $29.7 billion have been announced in the Middle East and North Africa so far this year, down 5.3 percent from 219 deals worth $31.4 billion in the same period last year, according to data compiled by Bloomberg. Barclays, the second-ranked arranger of M&A deals in the region, is advising Qatar Telecom QSC on its $2.2 billion purchase of a 47.5 percent stake in Kuwait’s National Mobile Telecom Co. (NMTC) and also managed the $1.4 billion acquisition by Qatar Investment Authority of a 20 percent stake in BAA Ltd.
The London-based bank’s fees from mergers and acquisitions advisory services “will be higher than last year’s,” Azar said, without giving more details on expected earnings.
Countries in the Middle East, including Saudi Arabia, the United Arab Emirates, Qatar and Kuwait, pump more than 20 percent of the world’s oil. In March, Mubadala Development Co. PJSC, the Abu Dhabi investment fund, announced it will pay $2 billion for a 5.63 percent preferred equity interest in Brazilian billionaire Eike Batista’s EBX Group Co. to help diversify investments, while Qatari sovereign funds have been acquiring assets in companies such as Swiss miner Xstrata Plc. (XTA)
Several Middle East companies are being “selectively active about acquisitions after digesting the impact of the credit crisis and cleaning up their balance sheets,” Azar said.
Barclays rose 0.2 percent to 183.60 pence in London as of 9:38 a.m. local time and gained about 5 percent this year.
Qatar National Bank SAQ (QNBK), the Persian Gulf country’s biggest bank by assets, is in talks to buy a majority stake in Societe General SA’s Egyptian unit, National Societe Generale Bank SAE (NSGB), the Cairo-based bank said Aug. 30. Societe Generale owns 77.2 percent of its Egyptian unit that has a value of 11.9 billion Egyptian pounds ($1.9 billion), Bloomberg data shows.
Qatar National also increased its stake in the U.A.E.’s Commercial Bank International PSC (CBI) to 39.9 percent from 16.5 percent, CBI said Aug. 30, a deal worth about $75 million.
Goldman Sachs Group Inc. (GS:US) is the top M&A advisor in the Middle East and Africa and globally this year, according to Bloomberg data. The value of announced M&A deals globally has declined 32 percent in 2012 to $1.38 trillion, the data shows.
Barclays named Antony Jenkins, the head of its consumer business, as chief executive officer on Aug. 30. Jenkins said that day he would “think strategically” about the investment bank’s future given regulatory pressures, and that the division had a “very good team.” Barclays is replacing some senior managers, including former CEO Robert Diamond and Chairman Marcus Agius, after politicians, shareholders and regulators accused the bank of having a culture of aggressively interpreting regulations and failing to stop wrongdoing.
Diamond, who built Barclays’s investment bank into the world’s biggest global bond underwriter, resigned in July after the bank was fined 290 million pounds ($459 million) by U.S. and U.K. regulators for attempting to rig the London interbank offered rate. With increased regulation from Europe and the U.K., volatile market conditions for mergers and acquisitions and continuing criticism of bankers’ pay by politicians, Barclays has faced calls from analysts and shareholders to either sell the division or reduce its size.
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