Business / Economy
Mergers and Acquisitions expected to increase in Zimbabwe
14 Apr 2011 at 23:20hrs | Views
MERGERS and acquisitions are expected to increase right through to next year as Zimbabwean companies seek to recapitalise and enhance operating capacity in an economy showing strong signs of recovery after a challenging decade.
The introduction of multi-currencies and increased production by companies has gradually set the stage for a dramatic economic turnaround, presenting a huge opportunity for deal-making and capital rising.
Statistics obtained by Herald Business show that the country's deals concluded last year were extremely low compared with other countries in the region, with noticeable mergers and acquisitions registering nearly US$20 million.
Out of the four noticeable transactions, three involved companies listed on the Zimbabwe Stock Exchange and one unlisted financial institution.
An investment analyst said over the last few years, deal-making in the corporate sector had remained substantially low due to the hyperinflationary environment.
"However, as companies seek to consolidate their operations and strengthen their balance sheets, the likelihood of mergers, acquisitions and debt and capital raising is very high in the short to medium term.
"It is expected that a series of deals will be tabled, particularly in the banking sector, as institutions fight to meet the prescribed minimum capital levels," said the analyst.
During the period under review, the merger between CFX Financial Services and Interfin Banking Corporation to form Interfin Financial Services was the only noticeable merger on the market.
CFX disposed of CFX Bank to Interfin Banking Corporation for a relative net asset value based consideration of US$7 475 837 in exchange for 5 089 289 Interfin Banking Corporation shares.
The transaction resulted in the new entity, listing on the ZSE through a reverse listing of CFX Financial services.
Beverages manufacturer Delta Beverages acquired a 49 percent stake in Schweppes for a cash consideration of US$530 000.
Banking group FBC Holdings concluded a significant transaction, acquiring a 49,2 percent stake in Eagle Insurance Company of Zimbabwe from Zurich South Africa in a US$650 000 cash transaction.
The transaction brought FBC's shareholding in the insurance company to 72,5 percent since FBC Reinsurance already had a 23,3 percent stake.
Another prominent deal outside the ZSE saw pan-African banking group Ecobank Transnational Incorporated gaining a controlling 70 percent stake in Premier Finance Group Limited in a transaction worth about US$10 million.
Another deal, which was not included on the mergers and acquisition list, involved starafrica corporation buying out minority shareholders in Redstar, converting the wholesale into a wholly-owned subsidiary of starafrica.
starafrica had offered to acquire the entire issued share capital of Redstar in exchange for starafrica shares or cash on the basis of 100 Redstar shares for every new starafrica share or US0,07c for every Redstar share.
But analysts debated whether or not the transaction could be listed as an acquisition.
Meanwhile, the Thompson Reuters investment banking analysis for the first quarter of this year indicated that the momentum from last year carried on into the first quarter of the year in sub-Saharan Africa as deal flow remained strong with investors attracted to African assets.
Big deals in energy and power helped to make the first quarter a buoyant one for the mergers and acquisitions and debt capital markets.
According to the report, investment banking fees reached US$157 million during the first quarter, double that of the same period last year.
Merger and acquisition fees accounted for 51 percent of the first quarter investment banking fees, totalling US$80 million.
Uganda was the most targeted sub-Saharan country, accounting for 51 percent of activity, followed by South Africa with 43 percent.
China was the most acquisitive nation of sub- Saharan companies with 26 percent of the activity followed by South Africa and Luxembourg.
The top sub-Saharan bond during the quarter was a US$1,7 billion issue by South Africa's Eskom Holdings.
Investment Bank Goldman Sachs topped the "any sub-Saharan involvement" mergers and acquisitions, ranking with US$3,9 billion, with Standard Chartered coming in second with US$2,9 billion.
Investec topped the fee ranking during the first quarter with US$26,4 million. Barclays Capital topped the equity capital market and debt capital markets fee rankings in the fist quarter with US$3,5 million and US$13,9 million respectively.
BNP Paribas and Citi were tied on number one for sub-Saharan equity capital markets underwriting during the first quarter of 2011, followed by Macquarie Group.
The introduction of multi-currencies and increased production by companies has gradually set the stage for a dramatic economic turnaround, presenting a huge opportunity for deal-making and capital rising.
Statistics obtained by Herald Business show that the country's deals concluded last year were extremely low compared with other countries in the region, with noticeable mergers and acquisitions registering nearly US$20 million.
Out of the four noticeable transactions, three involved companies listed on the Zimbabwe Stock Exchange and one unlisted financial institution.
An investment analyst said over the last few years, deal-making in the corporate sector had remained substantially low due to the hyperinflationary environment.
"However, as companies seek to consolidate their operations and strengthen their balance sheets, the likelihood of mergers, acquisitions and debt and capital raising is very high in the short to medium term.
"It is expected that a series of deals will be tabled, particularly in the banking sector, as institutions fight to meet the prescribed minimum capital levels," said the analyst.
During the period under review, the merger between CFX Financial Services and Interfin Banking Corporation to form Interfin Financial Services was the only noticeable merger on the market.
CFX disposed of CFX Bank to Interfin Banking Corporation for a relative net asset value based consideration of US$7 475 837 in exchange for 5 089 289 Interfin Banking Corporation shares.
The transaction resulted in the new entity, listing on the ZSE through a reverse listing of CFX Financial services.
Beverages manufacturer Delta Beverages acquired a 49 percent stake in Schweppes for a cash consideration of US$530 000.
Banking group FBC Holdings concluded a significant transaction, acquiring a 49,2 percent stake in Eagle Insurance Company of Zimbabwe from Zurich South Africa in a US$650 000 cash transaction.
The transaction brought FBC's shareholding in the insurance company to 72,5 percent since FBC Reinsurance already had a 23,3 percent stake.
Another prominent deal outside the ZSE saw pan-African banking group Ecobank Transnational Incorporated gaining a controlling 70 percent stake in Premier Finance Group Limited in a transaction worth about US$10 million.
Another deal, which was not included on the mergers and acquisition list, involved starafrica corporation buying out minority shareholders in Redstar, converting the wholesale into a wholly-owned subsidiary of starafrica.
starafrica had offered to acquire the entire issued share capital of Redstar in exchange for starafrica shares or cash on the basis of 100 Redstar shares for every new starafrica share or US0,07c for every Redstar share.
But analysts debated whether or not the transaction could be listed as an acquisition.
Meanwhile, the Thompson Reuters investment banking analysis for the first quarter of this year indicated that the momentum from last year carried on into the first quarter of the year in sub-Saharan Africa as deal flow remained strong with investors attracted to African assets.
Big deals in energy and power helped to make the first quarter a buoyant one for the mergers and acquisitions and debt capital markets.
According to the report, investment banking fees reached US$157 million during the first quarter, double that of the same period last year.
Merger and acquisition fees accounted for 51 percent of the first quarter investment banking fees, totalling US$80 million.
Uganda was the most targeted sub-Saharan country, accounting for 51 percent of activity, followed by South Africa with 43 percent.
China was the most acquisitive nation of sub- Saharan companies with 26 percent of the activity followed by South Africa and Luxembourg.
The top sub-Saharan bond during the quarter was a US$1,7 billion issue by South Africa's Eskom Holdings.
Investment Bank Goldman Sachs topped the "any sub-Saharan involvement" mergers and acquisitions, ranking with US$3,9 billion, with Standard Chartered coming in second with US$2,9 billion.
Investec topped the fee ranking during the first quarter with US$26,4 million. Barclays Capital topped the equity capital market and debt capital markets fee rankings in the fist quarter with US$3,5 million and US$13,9 million respectively.
BNP Paribas and Citi were tied on number one for sub-Saharan equity capital markets underwriting during the first quarter of 2011, followed by Macquarie Group.
Source - Herald
