DealMakers - Q1 2019
by Marylou Greig
At the time of going to print, the results of SA’s sixth democratic national elections were being released. South Africans as a whole are suffering political fatigue; the drop in numbers of citizens turning up to vote is a clear indication of this.
With the coming months unlikely to yield noticeable change as political parties again fail to fulfil mandates promised, South Africa is likely to continue down the slippery slide from its once held position of economic prowess and choice as an attractive investment destination – the continued deteriorating economic conditions and the extent of the corruption malaise testing, even for the most optimistic of investors. One only has to look at the International Monetary Fund’s 2019 GDP forecasts for East Africa released in April; Kenya 5.8%, Rwanda 7.8%, Ethiopia 7.7%, Tanzania 4% and Uganda 6.3%. South Africa is forecast at 1.2% growth.
M&A activity by exchange-listed companies in the first quarter of 2019 got off to a slow start. The total value of deals for Q1 2019 was R47bn (90 deals) against R135bn (110 deals) in Q1 2018. Of these, companies with a secondary listing on the JSE undertook nine deals, the majority of which were property deals. Other classifications included four BEE and four private equity deals.
The most active sectors were property, followed by mining and technology. The number of deals in Q1 over the past five years has been relatively consistent ranging from 90 to 123 deals, but it is the size and hence the value of the targets acquired or disposed of that is noticeable, dropping off dramatically. The largest deal by value in the first three months of 2019 was the acquisition by Naspers of a 29.2% in Avito for R15,78bn followed by the acquisition of Clover by a consortium of investors for R4,8bn. The Clover deal has had its share of controversy with Brimstone forced by a lobby group to review its participation in a 15% stake in the Israeli-led consortium.
The quarter’s General Corporate Finance activity was dominated by the unbundling and listing on the JSE by Naspers of MultiChoice with a market capitalisation of R46,52bn. Companies took the opportunity to return capital to shareholders valued at c.R3bn. The JSE, despite painful declines in some of its biggest listings, had a strong start to the year, helped by the boom in mining shares.
As growth worries and trade war jitters threaten to spoil any rebound for emerging markets in 2019, what South Africa needs is for the ruling party – with its second chance mandate – to form a strong and effective coalition with business, focused on growth, stability and anticorruption, to allow the country to win back the trust of investors and the ratings agencies.
I am pleased to report back that the first standalone DealMakers Africa Annual Awards in Nairobi in February was a great success, not only in recognising the achievement of the local advisory firms in East and West Africa but also in terms of providing an opportunity to network and explore possibilities within the African M&A space. Pictures of the events in Johannesburg and Nairobi, together with the winners, add a wonderful splash of colourful to the pages of this issue. I draw your attention to the new homes of DealMakers SA and DealMakers Africa whose websites have been created by Vanessa Aitken. I hope you will find the new look refreshing and the sites easy to navigate.