Barclays sees M&A active in Middle East and Africa

Pedestrians pass a Barclays bank, operated by Barclays Plc, in London, U.K., on Thursday, Feb. 26, 2015. Barclays will shrink its 2014 bonus pool more than 17 percent to less than 2 billion pounds ($3.1 billion) as the U.K.'s second-largest lender cuts back its investment bank, a person with knowledge of its compensation strategy said. Photographer: Chris Ratcliffe/Bloomberg

Pedestrians pass a Barclays bank, operated by Barclays Plc, in London, U.K., on Thursday, Feb. 26, 2015. Barclays will shrink its 2014 bonus pool more than 17 percent to less than 2 billion pounds ($3.1 billion) as the U.K.'s second-largest lender cuts back its investment bank, a person with knowledge of its compensation strategy said. Photographer: Chris Ratcliffe/Bloomberg

Published Apr 14, 2015

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Dinesh Nair London

BARCLAYS sees local firms and sovereign wealth funds driving Middle East deals after advising on about $15 billion (R180bn) of equity and mergers and acquisition (M&A) transactions in the first quarter.

“M&A will continue to be active and there will be some interesting outbound deals,” Makram Azar, the chairman for the bank in the Middle East and North Africa, said.

“Unlike in the past, sovereign wealth funds from the region will look at more return-generating assets such as… infrastructure, favouring annual cash returns.”

Oil’s almost 50 percent drop in 2014 prompted speculation that Middle East transactions would slow as countries such as Saudi Arabia and the United Arab Emirates (UAE) curbed spending. Instead, Azar said, increased volatility in the markets and demand for liquidity among clients in the region was leading to an increase.

The UK lender ranks number one for M&A and equity-linked deals in the Middle East this year, according to data.

The value of M&A deals in the Middle East and Africa region is up 92 percent this year to $19.6bn, according to data.

In January, Barclays worked on the Qatari sovereign-wealth fund’s acquisition of Songbird Estates – the owner of London’s Canary Wharf – and last month advised Borse Dubai on the sale of its $2.1bn stake in London Stock Exchange Group.

Barclays also advised OCI, controlled by billionaire Nassef Sawiris, on the listing of its construction business in the UAE and Egypt.

“It’s been a blow-out first quarter for us, whether in the equity capital markets or in M&A,” Azar said. “It’s hard to predict the exact levels of activity in the market, but… looking at our pipeline, we feel confident there are going to be interesting transactions from the region.”

Barclays is pursuing growth in emerging markets such as the Middle East and Africa as growing economies revive investor demand for share sales and M&As.

Azar, who is also the vice-chairman of the bank’s global investment banking business, was named the chairman for the Middle East and north Africa in June last year, two months after John Vitalo left as chief executive for the region.

The lender also last year named Khaled Eldabag and David Nataf as co-heads of the bank’s investment banking in the region.

Demand

Azar also expects to see demand for equity-linked transactions, such as Abu Dhabi’s Aabar Investments, which sold e2bn (R25bn) of unsecured exchangeable bonds over shares of UniCredit last month.

The bank has also been hired as an adviser by Emirates National Oil as it seeks to buy the remaining shares it does not already own in Dubai-based explorer Dragon Oil.

One area where activity in the Middle East was likely to be muted, though, was among companies mulling initial public offerings (IPO), Azar said, as sentiment among investors remained low. National Commercial Bank, the largest Saudi Arabian bank by assets, raised $6bn last year in the Middle East’s biggest IPO. – Bloomberg

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