Years come and go and all the while companies are merging, breaking up, disappearing and reinventing themselves in the constantly changing global business world.
In Egypt alone, 2008 has seen an abundance of high profile mergers and acquisitions, some of which have contributed to major changes in the local finance, media and manufacturing sectors.
The story isn’t all fun and games, however. With the onset of the global financial crisis late this year, some major deals fell through as companies found themselves struggling to keep afloat in a tumultuous financial climate.
As it becomes clear that the world’s economic problems aren’t going to fix themselves anytime soon, and the world’s mega-companies grind to a startling halt, those companies that managed to get their deals through in time are thanking their lucky stars, while those that didn’t have nothing to do but wait.
Vodafone Egypt and Sarcom
In August, mobile giant Vodafone banked a strategic asset in the ongoing competition between Egyptian mobile operators by acquiring Sarcom, one of Egypt’s most exciting digital media companies. This move is expected to give Vodafone an edge over competitors through rapid expansion of their web presence and better mobile internet services for customers.
Sarcom is the powerhouse behind high-traffic websites such as Filgoal.com, and has firmly established itself as the number one online media presence in Egypt. Clearly, Vodafone and its customers will benefit from the acquisition of this dynamic company as web presence becomes the new frontline in the battle of the mobile companies.
Bank Audi and EFG-Hermes
Longtime partners in the regional banking scene Bank Audi and EFG-Hermes were forced to cancel plans for a formal merger in October due to the global financial crisis. While both companies have yet to see the effects of rapidly spreading financial turmoil on their individual business, it seems that the time was just not right to take the partnership further.
Although talks about a potential merger had been going on for two years, at the end of the day representatives of both companies felt that the market distortions resulting from the financial crisis did not lay a good foundation for a lasting partnership. EFG Hermes currently owns a 23 percent stake in Bank Audi and the two groups plan to continue working together on selected projects until conditions improve.
Actis and Mo’men
After two years of negotiations Mo’men was not about to let international financial turmoil spoil its meticulously negotiated LE 257 million deal with British private equity company Actis. The terms of the merger grant Actis 28 percent ownership of the fast-growing Egyptian fast food chain.
This merger is expected to help Mo’men realize plans for expansion within Egypt and throughout the region in coming years, and is being lauded as a model for Egyptian businesses looking to partner with foreign companies to gain the capital needed to compete more aggressively in the increasingly globalized regional market.
Tarek Nour and DDB Communications
In just a few short years, the Tarek Nour Group has managed to make a major impact in the Egyptian media market. Not satisfied, Tarek Nour upped the ante with the September announcement of a major deal with DDB Communications, an affiliate of Omnicom, the largest communications company in the world.
The LE 375 million deal gives DDB a 49 percent stake in the Tarek Nour Group, with the Tarek Nour family retaining the remaining 51 percent. This merger was finalized after a lengthy bidding process, with top communications companies vying to gain a foothold into Egypt’s booming media sector. With DDB taking home the prize, we can expect to see this new partnership storming the regional communications scene in 2009.
Solvay and Alexandria Sodium Bicarbonate Company
In a November deal worth LE 760 million, European sodium carbonate manufacturer Solvay acquired full ownership of the Alexandria Sodium Bicarbonate Company. Solvay, which is the world’s largest producer of sodium bicarbonate, is expected to use this acquisition as a starting point for future ventures into the Middle East market.
Bank Du Caire
Acquisition seems to be the norm for Egyptian banks looking to expand these days. Unfortunately for Bank Du Caire, the current financial state of affairs doesn’t make people confident about buying banks. The plan was for the Egyptian government to sell a 67 percent stake in the bank to the highest bidder – a deal that was expected to be worth nearly ?1 billion.
In the end, the final-round bidders, which included the National Bank of Greece and Mashreq Bank didn’t bring enough to the table. Bank Du Caire is expected to take a new tactic to expand services around Egypt, at least until the world market recovers.
El Sewedy Cables and M. Torres Olvega
Expect to see more windmills very soon. Why? El Sewedy Cables, one of the Middle East’s leading cable companies has bought a 30 percent stake in the wind energy division of M. Torres Olvega, a Spanish company firmly established in the wind energy industry.
This deal, worth ?40 million, will help El Sewedy enter the wind energy market quickly and effectively in order to take advantage of what wind power can offer Egypt as a renewable energy source. El Sewedy, which is expected to purchase the remaining 70 percent share in M. Torres Olvega sometime in the next few years, will, in conjunction with the Egyptian government, use its new resources to increase renewable energy usage in Egypt.
GSK and Bristol-Myers Squibb
In October, British drug company GlaxoSmithKline bought the Egyptian mature products business of Bristol-Myers Squibb Co for $210 million.
After the announcement, Glaxo said it will become the leading pharmaceutical company in Egypt with a market share of 9 percent by acquiring 20 branded products in four therapeutic disease areas, including Duricef (antibiotic); Capozide and Capoten (ACE inhibitors); Theragran-H (iron supplement) and Kenacomb (topical steroid).
The business being bought generated 2007 sales of $48.5 million. The pharmaceutical market in Egypt is worth $2.1 billion and grew by 19 percent in value last year, Glaxo said.
While some grand plans for mergers fell through, 2008 on the whole was a good year for business as evidenced by the partnerships being formed between Egyptian and European companies across sectors. If these new teams can just hold out against the rising tide of the financial crisis, Egypt’s economy and industry can only benefit from well-planned mergers in 2009 and beyond.
