Economic analysts say that the economic revival currently underway, as oil prices soar and the shadow of COVID-19 fades, could witness several mega mergers and acquisitions (M&A). They add that most of these M&A activities, which had been put on the back-burner following the economic downturn in the wake of the global pandemic, are being revived and could be implemented over the coming period.
The planned mergers and buyouts could lead to the emergence of large financial and economic conglomerates in the banking, investment, real estate and telecom sectors in the country.
Among the scheduled mergers that are likely to be realized in the immediate future are those between Kuwait Finance House (KFH) and the Bahrain-based Ahli United Bank, which could lead to the establishment of one of the largest Islamic banking entities in the region.
Reports indicate that specialized advisors who were appointed by the board of directors of both entities have completed their due diligence study and submitted their reports for consideration and evaluation by their respective board of directors. KFH is also understood to have informed the Board of Directors of Al Ahli United Bank of an updated share exchange rate conditional on completing approvals from both shareholders and regulatory authorities.
Another major merger deal in the offing is one between Kuwait Projects Company (KIPCO) and local oil firm Qurain Petrochemical Industries Company (QPIC), with the two companies recently inking a memorandum of understanding to evaluate a merger offer. The merger of KIPCO, with consolidated assets of over KD10 billion at the end of 2018, and QPIC — formerly the government-owned Petrochemical Industries Company (PIC) and now one of the biggest private investors in the petrochemicals sector in Kuwait, with total assets of around KD800 million and a primary focus on the energy and industrial sectors — will lead to the formation of an investment holding company that will be among the largest in the Middle East and North Africa region, with assets amounting to over KD10 billion, according to the latest financial data disclosed by the two companies.
The merged entity will benefit from a balanced and diversified portfolio of assets and become the first company to achieve integration in the local investment sector. The new firm will have under its umbrella a wide ranging portfolio, including petrochemicals and oil services, in addition to banking, foodstuffs, insurance, industry, real estate, media and others.
The combined revenues from these varied portfolios will provide a more stable cash flow with diversified investments, sectorally and geographically. The new entity will also be able to compete better and give added value to its shareholders, as a result of its high financial capabilities and the integration of expertise, in addition to reducing operating and management costs and developing services and products.
Another deal being primed for merger is a tripartite one between United Real Estate Company (URC), Hospitality Holding Company, and United Towers Holding Company, which will also lead to the establishment of one of the largest real estate entities in the region.
The major player in this tripartite merger, URC, is the real-estate arm of its principal shareholder KIPCO, and one of the leading real estate developers in Kuwait and the MENA region, with consolidated assets of KD 600 million as of end 2021. URC primarily operates through a number of operating subsidiaries and investment arms across the MENA region, and enjoys a diversified portfolio of assets that include retail complexes, hotels, residential properties, and high-rise office buildings.
The merger will positively affect the investors in the three companies, and strengthen the income-generating assets of the diversified portfolio, and bring added value, in addition to increasing property rights and issuing new shares, as well as enhancing operational performance, increasing financial competitiveness and creating new investment opportunities for shareholders of the merged companies.
Finally, the local market witnessed the completion of an acquisition deal in the telecommunications sector, with the acquisition by Kuwait Telecommunications Company (formerly Viva and now stc) of Electronic Gate Holding Company, for KD23 million. Kuwait Telecommunications Company, established in 2008, is a Kuwaiti shareholding company and a leading brand in the telecommunications industry.
The acquisition will lead to the expansion of the activities of stc and will witness its gradual shift from traditional services to digital services and advanced informatics solutions in the field of integrated communications, advanced technical solutions, and the ability to provide enhanced digital services, including in Information and Communications Technology (ICT), Internet of Things (IoT), and Cloud services, in addition to enhancing the company’s internal capabilities in the field of information and communication technology in line with rapid global developments.
The process will allow stc to take advantage of growth opportunities in the corporate market, develop the scope of work and exchange experiences to support the digital transformation process, in order to provide the best services, products and solutions, provide the latest services and expand the company’s activities and businesses in the field of integrated communications and advanced technology solutions.
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