Local M&A activity down 23%
Value of deals for the year just more than $15bn South Africa's slip less than global drop
December 21, 2009
By Ethel Hazelhurst
Mergers and acquisitions (M&As) involving local companies are down 23 percent this year to just over $15 billion (R113 billion) from $19.8 billion last year, according to Thomson Reuters. Deals peaked in 2007 when they were worth $43.8 billion.
The value of deals globally fell by a third this year, Reuters said. The decline came in recessionary conditions and followed last year's credit crisis, which made funding more difficult to arrange.
Rob Wessels, the joint head of advisory at Nedbank Capital, said deals had been on hold because of the difficulty of predicting earnings; but there had been activity, mainly in defensive sectors such as pharmaceuticals and telecoms.
The biggest deal globally was the $68bn purchase by US-based pharmaceutical company Pfizer of rival Wyeth.
The biggest local deal of the year was Telkom's sale of its 35 percent stake in Vodacom to its shareholders for $3.2bn.
"The shares were valued based on the closing stock price of R52 on May 18, the first full trading day on which the shares were distributed," Reuters said.
The transaction followed the spinoff of 15 percent of Telkom to the UK's Vodafone - a deal that was almost torpedoed by a controversial last-minute court challenge by the Independent Communications Authority of SA (Icasa) and Cosatu in May. Two months before the court challenge, Icasa had given the deal the green light.
The next biggest local transaction was the acquisition in March by US investment fund Paulson of an 11.3 percent stake in AngloGold Ashanti, from London-listed parent Anglo American, for $1.3bn.
In January, Redefine Income Fund "completed its tender offer to merge with ApexHi Property, a property development firm in a stock swap transaction". The deal was valued at just more than $1bn.
A pending deal is the plan by SABMiller to divest a 10 percent stake in SA Breweries to staff and retailers. Reuters valued the deal at $750 million.
UK pharmaceutical firm GlaxoSmithKline acquired "the commercial operations, located in the Middle East, Asia Pacific, Latin America and Africa of Union Chimique Belge" in January. The acquisitions were worth $668m.
In March, Gold Fields "acquired the remaining 15 percent stake it did not already own in GFI Mining South Africa from Mvelaphanda Gold, a unit of Mvelaphanda Resources". The transaction was settled with $624.3m worth of Gold Fields shares, based on the value on March 17, the last full trading day ahead of the announcement.
In May, Vicva Investments & Trading Nine "agreed to launch a tender offer to acquire a 10 percent stake in ArcelorMittal South Africa". The deal, described as pending, is a share buy back valued to $470m. Vicva Investments is a wholly owned subsidiary of ArcelorMittal SA, the Vanderbijlpark-based manufacturer of iron and steel products.
Another pending deal was announced in May by GlaxoSmithKline, which plans to acquire a 16 percent stake in Aspen Pharmacare, a manufacturer and wholesaler of pharmaceutical products based in Durban, for $411.9m.
In September, Naspers bought a 91 percent stake in BuscaPE.com, a Sao Paulo-based provider of e-commerce services, from Great Hill Partners for $342m.
Last on the top 10 list of local deals was Remgro's announcement in June that it would buy the entire share capital of VenFin, "a Stellenbosch-based investment holding company and a majority owned unit of Vodafone Group, via a scheme of arrangement". The stock swap deal, valued at $321m, was concluded on November 23.
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