Kenya’s merger, acquisition deals slow down in 2015
Centum CEO James Mworia. Firms have done multi-billion shilling deals at Equity and Centum. PHOTO | FILE
What you need to know:
This year has seen 11 M&A deals compared to 17 in the first four months of 2014.
Mergers and acquisitions (M&A) in Kenya have slowed down in the first four months of 2015 compared to a similar period in 2014 despite the multi-billion shilling Equity and Centum share deals.
Data compiled by advisory firm Burbidge Capital on corporate deals in East Africa shows that this year has seen 11 M&A deals compared to 17 in the first four months of 2014.
In terms of disclosed value of the deals, this year has seen Sh51.5 billion worth compared to Sh30 billion by April 2014. However, the value of six deals in 2014 and five deals in 2015 were not disclosed.
This year, the largest concluded deal has seen Helios sale of a 12.22 per cent stake in Equity Bank to Norwegian funds Norfund and NorFinance AS for Sh23 billion—according to Burbidge though the amount has not been publicly disclosed to date—and Old Mutual’s Sh23 billion purchase of a 60.7 per cent stake in UAP Holdings from businessman Chris Kirubi, Centum and PE firms Abraaj Group, AfricInvest and Swedfund.
“In M&A we saw 13 deals in the year to date in East Africa. The deal of the month of April was the NSE-listed Centum’s Two Rivers development fundraising that attracted $155 million (Sh14.7 billion), including $70 million (Sh6.7 billion) in equity from the Aviation Industry Corporation of China (AVIC) for a 38.9 per cent stake,” said Burbidge Capital chief executive officer Edward Burbidge in the firm’s April financial review.
The Two rivers investment by AVIC is one of the largest foreign direct investments into any private enterprise in East Africa by a Chinese corporation.
According to Burbidge, private equity (PE) investments across East Africa this year have totalled Sh71 billion, versus PE exits of Sh48.8 billion. Private placements have amounted to Sh12.3 billion with rights issues of Sh3.8 billion.
In terms of sectors, the financial services sector has led with 10.4 per cent of the total deals this year, followed by manufacturing with 8.3 per cent, real estate and oil with 2.8 per cent each.
Kenya has kept its position as the leading M&A hotspot in East Africa. Last year, the country accounted for the lion’s share of the region’s 48 deals whose disclosed value stood at Sh86.2 billion ($947 million). In 2013, there were 31 such deals valued at Sh27 billion ($300.6 million).
Analysts have said the insurance sector remains the likeliest focus area for mergers and acquisitions this year, due to its high growth potential as well as the higher capital demands.
Banking could also provide a growth area in M&A in future, with the country seen as having too many banks (43) which makes it difficult for single lenders to take on financing of large-scale projects due to capital constraints.
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Note: The results are not exact but very close to the actual.
