Published: Jul 14, 2014
Source: Saudi Gazette

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Mideast M&A activity valued at $14b in Q2

Middle Eastern investment banking fees reached $237.9 million during the second quarter of 2014, a 72 percent increase from the previous quarter.  The value of announced M&A transactions with any Middle Eastern involvement reached $14.0 billion during the second quarter of 2014, 2.5 times the value registered during the previous quarter and the highest quarterly total since 1Q’11. 

Nadim Najjar, Managing Director, Middle East & North Africa, said: “ Middle Eastern equity and equity-related issuance during the first half of 2014 totaled $2.9 billion, a six percent increase in activity from the same period in 2013 ($2.8 billion). Middle Eastern debt issuance reached $18.0 billion during the second quarter of 2014, the all-time highest quarterly total recorded in the region.”

Speaking about investment banking fees, Najjar pointed out that despite the quarterly uptick, fees earned during the first half of 2014 registered a 19 percent decline from the same period in 2013 to $375.9 million.  Fees from completed M&A transactions totaled $110.9 million during the first six months of 2014, up three percent from the same period in 2013, and accounting for 29 percent of this year’s overall Middle Eastern fee pool. 

“Equity capital markets underwriting fees totaled $99.4 million, up 187 percent from the amount registered during the first half of 2013 ($34.6 million) and marking the best first half total for ECM fees in the Middle East since 2009.  ECM fees account for 26 percent of the fee pool.  Fees from debt capital markets underwriting declined 39 percent year-on-year to $64.5 million, while syndicated lending fees fell 53 percent to $101.2 million,” he added.

Najjar noted: “Lazard earned the most investment banking fees in the Middle East during the first half of 2014, a total of $29.4 million for a 29 percent share of the total fee pool.  Lazard topped the Middle Eastern completed M&A fee league table, while Qatar National Bank was first in the ECM underwriting fee rankings.  HSBC and National Bank of Abu Dhabi took the top spots in the Middle Eastern DCM and loans fee rankings, respectively.”

Commenting on M&A transactions, Najjar pointed out that value of M&A deals during the first half of 2014 declined 4 percent from the same period last year to $19.7 billion.  Domestic and inter-Middle Eastern M&A declined 49 percent from the first half of 2013 to $6.9 billion during the first six months of 2014. 

He added: “Inbound M&A also declined, falling 19 percent to $1.3 billion. Outbound M&A drove activity, up 83 percent from this time last year to reach $7.6 billion, the highest first half total since 2011.  Qatar’s overseas acquisitions accounted for 46 percent of Middle Eastern outbound M&A activity. The largest deal during the first half of 2014 was Labregah Real Estate Co’s purchase of a $2.5 billion stake in Doha-based real estate development firm, Barwa Commercial Avenue Co.  Boosted by this deal, Real Estate was the most targeted sector, accounting 29 percent of first half activity. Bank of America Merrill Lynch topped the 1H 2014 announced any Middle Eastern involvement M&A league table with $4.0 billion.”

In respect to Equity Capital Markets, Najjar pointed out that seven initial public offerings raised $1.5 billion and accounted for 53 percent of activity in the region. Follow-on and convertible offerings accounted for 13 percent and 34 percent, respectively. The largest IPO during the first six months of 2014 was the $905.3 million offering from Mesaieed Petrochemical Holding, a unit of state-owned Qatar Petroleum.  It was Qatar's first IPO since 2010. As sole bookrunner on the Mesaieed Petrochemical Holdings IPO, Qatar National Bank took first place in the 1H 2014 Middle Eastern ECM ranking.

About the debt capital market activity in 2014, Najjar said: “Dragged down by a slow first quarter, bonds issued during the first half of 2014 fell 16 percent from the same period last year, to $22.0 billion. Investment grade corporate debt totaled $16.4 billion and accounted for 90 percent of the first half total.  The United Arab Emirates was the most active nation accounting for 55 percent of activity, followed by Saudi Arabia with 28 percent.  International Islamic debt issuance declined 17 percent year-on-year to reach $14.1 billion, the lowest first half total since 2011. HSBC took the top spot in the Middle Eastern bond ranking during the first half of 2014 with a 14 percent share of the market.” 

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