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Mergermarket identifies Healthcare and F&B as Saudi Arabia’s most active M&A sectors

Thirty one major debt deals completed in 2015, excluding sovereign issuance

Mergermarket, the world’s leading news and intelligence service for mergers & acquisitions, has announced key trends and deals in the Saudi M&A market, in advance of its ‘Saudi Arabia M&A and Capital Markets Forum’ in Riyadh on Wednesday 18th November. Mergermarket’s sister company, Debtwire, has also released its Q1-Q3 findings for Saudi Arabian debt market activity in 2015.

A record breaking total of US$294m in Healthcare sector deals was bolstered by UAE-based Aster DM Healthcare’s US$264m takeover of a 57% stake in Sanad Hospital. The fourth largest deal of the year saw another UAE buyer, Amanat Holdings, take a 35% stake in Sukoon International Holding. According to Mergermarket intelligence, Saudi healthcare and life sciences investment company, ReAya Holding, which this year acquired a majority stake in Riyadh-based polyclinic and pharmacy chain Metrek, is actively evaluating further deals in the healthcare sector.

Ruth McKee Al Ghamdi, Head of Mergermarket MENA, commented: “By deal count, the only sector that has stood firm since 2014 is Industrials & Chemicals. We’ve seen four transactions in this sector, matching the number for the same period in 2014, but with a significantly lower total value of US$ 18m, compared with US$ 37m last year. A lack of Energy or Mining deals has cast a shadow on overall deal value, compared with four deals totalling US$ 328m last year. Another sector with a decreased level of activity is Consumer, with one deal compared to four in 2014.”

Mergermarket believes that Al-Raya For Foodstuff, the Saudi Arabia supermarket operator, is being targeted for a takeover by private equity firm Apollo Global Management in competition with UAE private equity players Gulf Capital and Fajr Capital. Mergermarket has also identified rumours of a major potential cross border bid being prepared by Savola Group and Singapore sovereign wealth fund Temasek to acquire a majority stake in Kuwait’s Americana Group. Americana Group is thought to have been valued at about US$ 4bn.

Anil Menon, MENA M&A and IPO leader, EY, commented:

“This is a very interesting time for the Saudi M&A market. Broader structuring options are becoming available and there’s been increased receptivity to work with these new options. The most significant contributor to deal activity in Saudi has been the increased penetration of private equity. Also noteworthy is that several IPO candidates are running dual track processes, and choosing a private exit over an IPO. From a sector perspective, we expect petrochemicals, retail, consumer products and healthcare to see the most deal closures in 2015.”

Analysis by Debtwire has identified 31 major debt market deals completed so far this year, excluding sovereign issuance, totalling US$ 32.4bn. Saudi Arabia’s sukuk market continues to be dominated by local currency deals, with US$ 4.4bn worth of sukuk emanating from Saudi-based issuers denominated in SAR. Debtwire has recognised a strong theme of lenders preparing for Basel III implementation by issuing capital friendly Tier 1 and Tier 2 instruments. National Commercial Bank is the only lender to have issued a Tier 1 sukuk, having placed SAR 1bn notes in June.

David Graves, Senior Reporter, Debtwire, commented: “Saudi Arabia’s debt market is starting to respond to the government’s reaction to the new oil price environment. With liquidity tightening and debt pricing on the rise, bankers are taking a ‘wait and see’ attitude before December’s budget. In the meantime, only the highest rated credits and government related entities are likely to tap the market.”

Issuance in the Saudi Arabian loan market has totalled US$ 26.5bn so far this year. This was heavily bolstered by the US$ 10bn four-tranche revolver secured by Saudi Aramco in March, split across a 5+1+1 tranche and a 364-day annually renewable tranche. Project finance deals also contributed significantly with a US$ 5.2bn financing package signed for the Rabigh 2 IPP power station in March and a US$ 1.7bn package for an ACWA Power and Air Products joint venture at Saudi Aramco’s Jazan refinery.

Mergermarket’s Saudi Arabia Forum will address the market’s most important deal drivers, as well as looking ahead to key investment trends likely to be experienced in the coming year. Capital Markets and M&A professionals from the Middle East’s leading corporates, investment banks, private equity funds and financial & legal advisory firms will participate in panels, presentations, case studies and open Q&A sessions.