East Africa attracts Sh78bn mergers

The disclosed value of mergers and acquisitions (M&A) deals in East Africa has hit Sh77.8 billion in the first 10 months of this year, outpacing that of private equity deals.

Analysis by I&M Burbidge Capital shows that there have been a total of 29 mergers and acquisitions deals in the region this year, 24 of which have been based in Kenya.

At the same time, there have been 33 private equity deals, whose disclosed value is, however, lower than that of mergers at Sh48 billion.

In 2015, the disclosed value of M&A deals in the region stood at Sh87 billion, while that of private equity deals stood at Sh1.4 billion.

Kenya has been able to attract the majority of the incoming acquisition deals due to a stable exchange rate and inflation, while the economic growth rate of 6.1 per cent is ahead of the sub-Saharan Africa average of 1.4 per cent this year.

“The country’s stable economic growth coupled with stable foreign exchange rate and inflation rate make it an attractive investment destination in the region…should the stable macroeconomic environment continue, Kenya is expected to retain its position in attracting foreign investment in Africa, having been ranked ninth out of 28 African countries surveyed by research firm StratLink Africa for the first eight months of 2016,” said I&M Burbidge in the October East Africa financial review report.

This year, joint ventures have accounted for six deals in the region, valued at Sh23.6 billion.

There have also been three rights issues raising Sh29 billion, the main one being the KenGen rights in June, which raised Sh26.5 billion in what is the largest rights issue ever undertaken at the NSE.

READ: Mergers and acquisitions in East Africa on the rise as firms seek capital, expansion

Some of the major disclosed merger and acquisition deals this year in Kenya include the Sh6.4 billion investment in NSE-listed Centum Two Rivers Lifestyle Centre (TRLC) by UK-based Old Mutual Group for a direct 10 per cent shareholding and an additional 40 per cent in form of convertible debt.

Bombay Stock Exchange-listed Strides Shasun Ltd in February made an agreement to buy a 51 per cent stake in Kenyan drug manufacturer Universal Corporation Ltd (UCL) for Sh1.4 billion, of which Sh1.1 billion was payable upfront and Sh300 million on performance-related terms.

In June, Kenya Re paid Sh1.25 billion for an additional 4.44 per cent stake (2.83 million shares) in Nairobi-based reinsurer Zep Re, the report shows.

The deal took Kenya Re’s holding to 19.88 per cent.

This month, the most significant deal in the region is likely to be the sale of a 14.3 per cent stake in Uganda listed power firm Umeme by British PE firm Actis, taking place in both the Nairobi and Uganda Securities Exchanges.