Saudi Arabia Logs Highest M&A Value at $72.6 Billion

Saudi Arabia saw a jump in M&A volume and value (14 deals worth $72.6bn) during the first half of 2019, due to the blockbuster $70bn SABIC deal announced in 1Q19, the region’s highest value deal on record and the second largest industrials and chemicals deal globally, said Mergermarket, the leading provider of M&A data and intelligence, on its research released

The Saudi Arabian IPO market, according to Mergermarket data, has seen limited activity in the last few years, however in 1H19, the country experienced IPOs worth $752m spread across three offerings, its highest value since 2015. These IPOs included the offering for real estate business Arabian Centres Company, worth $659m; Maharah Human Resources Company worth $207m and Ataa Educational Company, worth $93m.

Patrick Harris, Head of Energy and Natural Resources at Mergermarket and Dealreporter, said: “Saudi Arabia remains the key market driving blockbuster M&A in the region. The behemoth majority acquisition of Sabic by Saudi Aramco, a shift away from upstream oil and gas, is indicative of how the Kingdom’s economic and social reforms have filtered through to the deal making and investment landscape. With a raft of slated privatizations, or part- privatizations, under review, a number of potential investment targets will likely come to market, whether through stake sales or IPOs, such as that planned for Saudi Aramco.”

The project finance sector in the country has also been active in the last 18 months, according to Merger market’s infrastructure focused sister brand Inframation, with big projects set to reach financial close in the country including two Independent Water Projects (IWP), a solar photo voltaic (PV) project and a wind farm. Projects included the $646m Shuqaiq 3 project awarded to Acciona and Marubeni in a consortium with local developers, which closed in May; the $715m Rabigh 3 project, awarded to ACWA Power and Saudi Brothers, closed in March and the 400MW Dumat al Jandal wind farm, awarded to EDF and Masdar, which closed in June.

The Saudi infrastructure pipeline looks strong, as the government plans to use PPPs and privatizations to achieve its Vision 2030 plan. The National Centre for Privatization (NCP) has a huge range of projects in the power, water, healthcare, road and rail sectors. Live transactions by the NCP currently include a PPP to build 60 schools, a radiology PPP, the King Faisal Specialist Hospital staff accommodation PPP and the King Faisal Specialist Hospital equipment management services PPP. Eight solar PV projects are also currently at the pre- qualified proponents stage.

Chris Haffenden, Project Lead, Project Finance at Acuris, said: “Foreign interest in Saudi projects has grown sharply, as the Kingdom seeks to finance ambitious infrastructure and privatization programs.

Over 100 entities pre-qualified for the second renewable round. There are over 100 initiatives, across 12 sectors, planned under the Vision 2030 program. Six deals have already closed for $3.5bn.

The deal pipeline includes a number of water, waste and desalination projects, with pilots also due in healthcare and education.

The Public Investment Fund (PIF) is developing a $500bn giga-project, Neom, a futuristic smart city on the Red Sea Coast the size of Massachusetts. Advisors are already salivating over potential mandates.”

Campbell Steedman, Managing Partner, Middle East at Winston & Strawn LLP, said: “It has been a bumper year for deal-making and M& A activity in Saudi Arabia, reflecting not only the better economic growth prospects within the kingdom and wider region, but also the rising investor confidence at boardroom level. Looking ahead, with the Saudi Aramco IPO on the horizon and a number of other important M&As in key industries in the pipeline, we expect this to encourage further IPO activity and fuel new investments and greater liquidity for the region as a whole, as companies look to drive more value through consolidation.”

Mergemarket hosted the 2019 edition of its Saudi Arabian M& A and Capital Markets Forum in Dubai on Sept. 9, 2019. The event took place in partnership with Winston & Strawn LLP, EY, Parthenon, DFin, Kroll and was attended by corporate development and M& A teams, private equity professionals, business owners, investment bankers, financial advisors, lawyers and transaction services professionals.