GCC private equity and M&As
The United Arab Emirates have taken the top spot in terms of private equity (PE) deals in the Middle East during the first half of 2009, according to Bureau van Dijk Electronic Publishing (BvDEP), a research firm. The UAE led the pack with a total of seven PE deals. Jordan and Kuwait registered only two deals each in the same period. The report found that in the first half of 2009 the region’s deal flow decreased 79 percent in terms of value, to $314 million, and decreased 41 percent in volume, to 13 deals, compared to the second half of 2008.
The report also highlighted the continued fall in the number of mergers and acquisitions (M&As) in line with the global trend. M&A activity declined 70 percent to $6.24 billion from a total of $21.03 billion in the second half of 2008. The volume of M&As also fell in the first six months of 2009, but performed better than the last 6 months of 2008, with a total of 122. The UAE again topped the tables in terms of M&As with a total of 36 deals.
The accuracy of the findings are marred, however, by the sector’s lack of transparency in the region. The total value of the deals closed by some of the region’s biggest players, such as Abraaj Capital, were not made public.
Saad/Algosaibi scandal
The saga of Saudi conglomerates Ahmad Hamad Algosaibi & Brothers co. (AHAB) and Saad Group has created one of the worst multi-billion dollar regional default crises since the global financial turmoil struck last year.
Saad Group, a $30 billion empire built by powerful Saudi businessman Maan al-Sanea, began showing signs of distress in June, after the Saudi Central Bank (SAMA) froze the personal accounts of Sanea and his family members. This unusual action by the central bank caused quite a stir throughout the Saudi banking sector, leaving many question marks in its tracks. Saad Group issued a statement saying, “Recent events, specifically affecting the Bahraini banking sector, have led to a short-term liquidity squeeze affecting Saad Group companies in the Middle East.”
“We are continuously striving to mitigate the effects of the limited squeeze and are also planning for an orderly restructuring of the debt of affected companies in cooperation with our counterparties and international advisers,” the company added.
As of June 27, Bloomberg reported AHAB owed $9.2 billion to more than 100 banks across the region, and less than two weeks later, AHAB filed a lawsuit against Sanea for $10 billion. AHAB is suing Sanea for fraud, insisting he embezzled money through his position at one of AHAB’s subsidiaries, Money Exchange, to ransack the company using inflated short-term foreign transactions. AHAB is apparently owned by al-Sanea’s wife’s family, making this a very complicated family matter.
Standard & Poor’s rating agency said that 30 banks rated by the credit ratings agency have significant — but manageable — exposure to the two troubled corporations. EFG-Hermes investment bank reported Abu Dhabi Commercial bank alone could easily have more than $500 million exposure to the companies. Fitch Ratings also said Mashreqbank’s exposure was severe, but manageable.
Regional pessimism
MasterCard Worldwide’s consumer confidence survey showed a drop in consumer confidence in six countries in the Middle East and North Africa. The 100 point index uses 50 points as a baseline to determine whether a sample is optimistic or pessimistic.
Kuwait registered the largest drop, from an optimistic 96.6 points to a pessimistic 49 points from the previous period. Egypt was the most pessimistic with a score of 32.3 points, while the most optimistic was Qatar at 71.4 points. The survey noted an increase in people saving for “precautionary purposes,” and also showed that people in the Gulf countries will be “saving more,” as opposed to Egypt and Lebanon, who will be “saving less.”
“This is the first time the Middle East as a whole has come in below 50,” said Shaun Rashid, the head of MasterCard Worldwide’s business in Egypt and Levant, who presented the results. “The last time we conducted this survey it was in November of last year and the [crisis] was not as widely understood by the consumers. This time around… when we got their responses they were responses that were in light of the global economic crisis.”
The results were compiled from a survey conducted between March and April in which 400 people in Saudi Arabia, Lebanon, Kuwait, United Arab Emirates, Qatar and 600 people in Egypt were asked questions about their consumption habits. All participants were either debit or credit card holders from the ages of 18 to 64.
