São Paulo – A survey of mergers and acquisitions in the Middle East and North Africa published this week by consulting firm Ernst & Young shows that outside of the Arab world, Brazil was the second largest target for investment of the type in the region, value-wise. Transactions by Arab investors on the Brazilian market reached US$ 4.5 billion in 2010, second only to the United Kingdom, where deals have totalled US$ 5.2 billion.
The largest acquisition by Arab investors in Brazil was the purchase of a 5% stake in the Brazilian subsidiary of the Santander Bank by Qatar Holding, the executive arm of the Qatari sovereign fund, for US$ 2.7 billion. This was the third largest operation of the year in the Middle East, according to the survey.
The survey’s calculation of total investment in Brazil includes the purchase of a US$ 1.8 billion stake in the BTG Pactual bank by a foreign consortium*. The deal was announced late last year. The fund comprises the United Arab Emirates-based Abu Dhabi Investment Council and other international institutions.
In interviews and statements, the Arab Brazilian Chamber of Commerce president, Salim Taufic Schahin, has repeatedly claimed that Brazil is on the "radar" of the Arab world as far as direct investment is concerned.
On Tuesday evening (22nd), for instance, at a roundtable held at the Library and Centre of South American and Arab Research (Bibliaspa) headquarters, in São Paulo, Schahin mentioned a talk that he had last December with the top executive of the Abu Dhabi sovereign fund, who expressed his interest in investing "significant amounts" in Brazil. The fund already has business in Brazil, including a stake in Santander Brazil that was purchased in 2009, as well as stakes in real estate enterprises.
Qatar Holding also has other business in Brazil and last year, Hassad Food, the company’s food industry arm, announced that it was negotiating acquisitions in the country’s agricultural sector.
Another deal announced in 2010, although it was made in December 2009, was the purchase of Brazilian logistics company Itatrans by Agility, a Kuwait-based company in the same field.
The United Kingdom and Brazil received the largest amounts, but the United States was the leading country in terms of number of transactions, at 14, followed by the United Kingdom, India and Turkey, at 12 operations each.
Total
The total value of mergers and acquisitions by Middle Eastern and North African enterprises in 2010 was US$ 55.9 billion, a 65% increase over 2009, according to the Ernst & Young survey. The number of operations effected grew by 14%, from 353 to 402.
The main operations announced in 2010 were the purchase of a stake in the Kuwaiti telecommunications company Zain by its Emirates-based counterpart Etisalat, valued at US$ 12 billion; the acquisition of a stake in Saudi Sabic by the Saudi General Organisation of Social Insurance, at US$ 3.6 billion; and the purchase of Santander Brazil bonds by Qatar Holding.
Ernst Young informs, however, that the survey was based on deals that have been announced, though not necessarily closed, in 2010. Etisalat’s purchase of a stake in Zain, for example, has not been confirmed yet.
Local deals accounted for 54% of all mergers and acquisitions, according to the consulting firm. Acquisitions of companies from outside the bloc represented 29%, whereas purchases of companies in the region by international groups answered to 17%.
United States-based enterprises purchased the most assets in the Arab world in 2010, and Egypt attracted the most foreign capital into the region.
The Emirates were the country that invested in international companies the most, at a total of 42 operations, equivalent to 36% of the total value. The country was followed by Qatar, at 14 operations and 12% of the total value; and Saudi Arabia (13 deals and 11% of the total capital).
*Translated by Mark Ament & Gabriel Pomerancblum. Updated this Thursday (24th) at 01:30 pm
