Lumpy M&A deals unlikely to boost 2014 activity in Middle East

Despite a rise in the value of regional M&A deals, this trend is unlikely to continue into next year, says Mergermarket.

Aldar and Sorouh merged this year to create a $15 billion company.

A large increase in targeted mergers and acquisitions in the first nine months of 2013 does not herald a sustained increase of Middle Eastern deals in 2014 and beyond, according to Mergermarket.

Africa and Middle East-targeted mergers and acquisitions announced in the first nine months reached US$51.6 billion, matching the annual total for 2012, according to Mergermarket’s Q1-Q3 2013 M&A Round-Up, published last week. This year is forecast to be the first since 2007 in which there was M&A activity worth more than $10bn each quarter, according to the report.

However, the rise in regional M&A activity is largely attributed to just three large deals, namely the merger of Aldar Properties and Sorouh Real Estate, the merger of Dubai Aluminium (Dubal) and Emirates Aluminium (Emal), and Etisalat's potential acquisition of a 53 per cent stake in Maroc Telecom from Vivendi Telecom.

These three deals account for 42.8 per cent of M&A activity for the year, and should be seen as the exception rather than the rule, said Lucia Dore, the head of GCC and the Middle East for Mergermarket.

“These deals are not indicative of what’s going to happen,” she said. “They have all been government-inspired deals, and there aren’t many mergers of such a scale that are likely to happen going forward.”

Regional M&A activity has largely dried up since the three larger deals were announced, she said. “Corporate financings are going on, but there doesn’t seem to be too many deals going on right now.”

Middle East deals in the short to medium term are likely to be concentrated in relatively stable markets such as the UAE, Saudi Arabia and Oman, with the information and communications technology sector likely to experience a number of smaller deals, said Miss Dore.

The $7.5bn merger of Dubal and Emal is the largest deal of the year so far in the Middle East and Africa, according to Mergermarket. The merger, announced in June, will create the world’s fifth-largest aluminium producer with an enterprise value of $15bn.

The joint venture expects to add 2,000 new jobs by 2020 and estimates that a further 6,000 indirect jobs will be created by a growing aluminium sector in the country.

Etisalat is the sole bidder for Vivendi's 53 per cent stake in Maroc Telecom, tabling a binding offer of €3.9bn (Dh19.37bn) in July. The only other interested party, Qatar's Ooredoo, withdrew from the bidding process in June.

The UAE telecoms company last month announced that talks with the French conglomerate have been extended until the end of October.