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Merger and Acquisition

Sub Saharan Africa Mergers and Acquisition Hits US$10.3bn in Q1 2020

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Sub Saharan Africa M&A Hits US$10.3bn in Q1 2020

South Africa – Refinitiv today released the 2020 first-half investment banking analysis for the Sub-Saharan Africa. According to the report, investment banking fees in Sub-Saharan Africa reached an estimated US$64.5 million during the second quarter of 2020, half the value recorded during the first quarter of 2020 and the lowest quarterly total since Q1 2012.

Around US$196.1 million worth of fees were earned in the region during the first half of 2020, down 27% from last year and a six-year low with fee declines recorded across M&A advisory, debt capital markets underwriting, and syndicated lending. Debt capital markets underwriting fees declined 45% to US$26.2 million, marking the lowest first half year total for bond fees in the region since 2016. Advisory fees earned from completed M&A transactions generated US$43.4 million, down 50% year-on-year to the lowest first half level since 2005, while syndicated lending fees fell 36% to a six-year low of US$71.5 million. Equity capital markets underwriting fees increased 164% year-on-year to US$55.1 million.

Government & Agency fees accounted for 26% of total investment banking fees earned in the region during the first half of 2020, up from 14% during the same period last year. South Africa generated the most fees in the region during the first six months of the year, a total of US$108.4 million accounting for 55%, followed by Nigeria with 13%. JP Morgan earned the most investment banking fees in the region during the first six months of 2020, a total of US$23.1 million or an 11.8% share of the total fee pool.

As for Mergers and Acquisitions (M&A), the value of announced M&A transactions with any Sub-Saharan African involvement reached US$10.3 billion during the first six months of 2020, 44% less than the value recorded during the same period in 2019, and a two-year low. The number of deals declined 18% over the same period. After just US$424.5 million worth of deals were recorded in April, marking the lowest monthly M&A total since October 2005, activity increased for two consecutive months to reach US$3.0 billion in June, a nine-month high.

Deals with a Sub-Saharan African target declined 76% by value to an eighteen-year low of US$3.2 billion, as domestic M&A within the region declined 71% from last year and the combined value of inbound M&A deals reached just US$1.2 billion, the lowest first-half level in more than two decades. The largest deal involving a Sub-Saharan African target was announced at the end of May – Afrimat’s US$644.3 million acquisition of South African mine operator Unicorn Capital Partners.

Deals in the materials sector accounted for 46% of Sub-Saharan African target M&A activity during the first six months of 2020. South Africa was the most targeted nation, followed by Uganda and Nigeria. Outbound M&A totalled US$3.6 billion during the first six months of 2020, 67% more than the value recorded during the same period in 2019, despite a 22% decline in the number of deals. With advisory work on eleven deals with a combined value of U$1.7 billion, JP Morgan holds to the top spot in the financial advisor ranking for deals with any Sub-Saharan African involvement during the first six months of 2020.

In the Equity Capital Market space, Sub-Saharan African equity and equity-related issuance totaled US$1.5 billion during the first half of 2020, 16% more than the value recorded during the same period last year, but lower than every other first half total since 2009. The number of deals recorded declined by 29% to the lowest first half tally since 2009.

Africa's equity capital marketOnly one initial public offering was recorded during the first six months of the year. Malawian telecoms company, Airtel Malawi, raised US$28.7 million on the Malawi Stock Exchange in February. JP Morgan took first place in the Sub-Saharan African ECM underwriting league table during the first six months of 2020.

As for Debt Capital Markets, the African Development Bank raised $3 billion in a “Fight Covid-19” social bond at the end of March to help alleviate the economic and social impact the Coronavirus pandemic will have on livelihoods and economies in the region. With this deal, and Ghana’s US$3 billion Eurobond in February, Sub-Saharan African debt issuance totalled US$8.9 billion during the first quarter of 2020, the second-highest first quarter DCM total in the region of all-time. Only US$1.9 billion was raised during the second quarter, taking the value raised during the first six months of 2020 to US$10.7 billion, down 14% from last year and a four-year low. Deutsche Bank took the top spot in the Sub-Saharan African bond underwriter ranking during 1H 2020 with US$1.7 billion of related proceeds, or a 16% market share.

Africa's Debt Capital Market Q1, 2020

Africa's M&A Q1, 2020

Africa’s M&A Q1, 2020

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CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Merger and Acquisition

Nvidia’s Arm Acquisition Now Highly Unlikely to Go Through

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Gartner semiconductor analyst Alan Priestly has said that Nvidia’s planned $40 billion acquisition of United Kingdom Chip Designer Arm is becoming more unlikely to be successful.

Priestly attributed this possible failure to the increasing number of regulatory inquiries which the deal is facing, also making mention of concerns in the United Kingdom, the European Union, the United States of America and China. Priestly said this to CNBC on Wednesday, with both Nvidia and Arm failing to respond immediately to a request for comment by CNBC.

The deal had previously eyed a completion date of March 2022, but the CEO of Nvidia Jensen Huang had admitted in August that the deal may go beyond the anticipated date.

Arm was born out of an old computing company known as Acorn Computers back in 1990. The energy-efficient chips designed by the company are used in about 95% of smartphones around the world and 95% of chips designed in China. The company was bought by Japan-owned SoftBank in 2016 for about 24 billion pounds ($32 billion), authorizes its chip designs to over 500 companies who use these chips when making their own semiconductors.

Critics have concerns that the merger with Nvidia – who is responsible for designing its own chips – could hinder Arm’s semiconductor designs which have been dubbed neutral, and may then lead to increased prices, less available choices and reduced innovation across the industry. Nvidia however argues that the deal will result in more innovation and that Arm will benefit from an increase in investment.

American chip giant Broadcom has publicly shown support for the deal, but many others remain against it.

Qualcomm has stated that Nvidia could proceed to limit the supply of Arm’s technology to competitors, or even raise prices. Bloomberg reports that Google and Microsoft have raised similar concerns with regulators.

The United Kingdom announced back in November that it would be launching a full investigation into the takeover of Arm by Nvidia, with the Competition and Markets Authority (CMA) investigating antitrust concerns and national security issues over the period of 24 weeks.

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Merger and Acquisition

United Kingdom Ordered Meta, Formerly Facebook, to Sell Giphy

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The United Kingdom’s Competition and Markets Authority (CMA) has instructed Meta – formerly known as Facebook – to sell Giphy, the American search engine that allows users search for and share short looping videos which are without sound, that are similar to animated GIF files.

The CMA stated that the merger deal could possibly be harmful to social media users and advertisers in the UK. It also found that the deal would further boost Meta’s already strong market power, as it would limit other platforms’ ability to use Giphy GIFs, which will, in turn, drive more traffic to sites owned by Facebook (WhatsApp, Instagram and Facebook).

According to the CMA, Meta’s sites dominated social media usage time up to around 73 percent, and could eventually outperform social media rivals like TikTok, Twitter and Snapchat by leveraging Giphy. The Authority then added that before the merger, Giphy had launched ”innovative advertising services” which brands like Dunkin’ Donuts and Pepsi which it could possibly have brought to the United Kingdom.

The CMA also stated that at the time the merger was made, Giphy’s advertising services were terminated by Facebook. That move removed a vital part of potential opposition in the market. The CMA was concerned by this move, calling it particularly concerning considering that Facebook is in control of about half of the £7 billion display advertising market in the UK.

Facebook had acquired Giphy for a reported fee of $400 million, with an aim of integrating the service into Instagram. After a month, the CMA started an investigation into the merger and decided in August that Facebook could hinder social media rivals such as TikTok and Snapchat from tapping into Giphy’s GIFs.

Meta had initially stated that the CMA did not have jurisdiction because Giphy was not operational in the United Kingdom, adding later that Giphy’s paid services were not display advertising by the definition of the CMA.

In October, Meta was fined $70 million by the CMA for breaking some rules related to the deal by failing to report necessary information and changing its chief compliance officer on two different occasions without receiving permission.

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Seplat Energy to Acquire ExxonMobil’s Nigerian Shallow Water Business

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Seplat Energy Plc - Investors King

Seplat Energy Plc, Nigeria’s leading indigenous energy company, has confirmed that it is in the process of acquiring ExxonMobil’s Nigerian shallow water business.

The company disclosed in a statement signed by Mr. Emeka Onwuka, Chief Financial Officer, and accessed by Investors King.

ExxonMobil has been selling off its businesses in Europe, Africa, and Asia in recent years to focus on a few mega-projects at home and abroad.

The statement reads, “Seplat Energy Plc, a leading Nigerian energy company listed on the Nigerian Exchange and the London Stock Exchange, notes the recent press speculation and confirms that Seplat Energy, together with a partner, is in competitive discussions to acquire ExxonMobil’s Nigerian shallow water business.”

According to Seplat, there is no certainty as to the outcome of the ongoing discussions.

“Deliberations are ongoing and accordingly, there can be no certainty as to the outcome. A further announcement will be made as and when appropriate, in line with regulatory requirements,” Seplat stated.

The announcement is coming a few days after Seplat Chairman, ABC Orjiako resigned from his position as the Chairman of the company following a debt scandal with Zenith Bank Plc.

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