Market News

Value of corporate deals drops to Sh2.6bn in April

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Cytonn Investments chief executive Edwin Dande (right) with Superior Homes Kenya MD Ian Henderson during a stake acquisition announcement media briefing on January 31, 2017. FILE PHOTO | DIANA NGILA | NMG

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Summary

  • Mergers, acquisitions and private equity transactions have dominated the corporate deal space, while the market was quiet in IPOs and rights issues.
  • Regionally, the only concluded IPO since the beginning of the year is that of I&M Rwanda in March.
  • A struggling market is not conducive for capital raising, with companies likely to hold off until prices improve so that they can raise as much capital as possible.

The value of disclosed corporate deals in the region dropped significantly to Sh2.6 billion in April compared to Sh12.4 billion in March as Kenya again accounted for the bulk of completed deals.

Analysis by I&M Burbidge Capital shows that there were only five deals last month compared to eight apiece in February and March, with the slowdown in capital market activity seen affecting the business.

Mergers, acquisitions and private equity transactions have dominated the corporate deal space, while the market was quiet in IPOs and rights issues.

“The poor performance of Kenyan listed equities is certainly having an impact on the volume of IPOs but we know, from our own pipeline, that once the market turns there will be a large pick-up,” said I&M Burbidge chief executive Edward Burbidge in the analysis.

A struggling market is not conducive for capital raising, with companies likely to hold off until prices improve so that they can raise as much capital as possible.

A number of firms have also been struggling in the tough economic climate and are concentrating on cost cutting rather than expansion.

Regionally, the only concluded IPO since the beginning of the year is that of I&M Rwanda in March, in which the Rwandan government exited the lender in the issue valued at Sh1.1 billion.

There has only been one corporate bond issue as well; the EABL #ticker:EABL Sh6 billion medium term note which went on sale in March.

The bulk of the disclosed value of deals in April came from Equity Group #ticker:EQTY .

The bank revealed in its annual report that it had paid Sh2.2 billion for an additional seven per cent stake in Congolese lender Pro Credit Bank Limited, raising its holding to 86 per cent from the 79 per cent it acquired in 2015.

The other notable but undisclosed deal during the month was investment firm Centum’s #ticker:ICDC sale of its minority stake in Kenya Wine Agencies Limited (Kwal) to South African brewer Distell for an undisclosed amount.

READ: Centum set to earn 8,000pc gain from sale of Kwal stake to Distell

In the first four months of the year, the total amount in disclosed deals stood at Sh114 billion ($1.1 billion), of which Sh100 billion was in mergers and acquisitions.