Takeover tsunami coming to Africa?

The wave of mega acquisitions which has gained momentum in South Africa this year could only be the start of a takeover tsunami, as large companies start to include Africa in their global business visions. An excellent article on Bloomberg yesterday (www.bloomberg.com) also says that South Africa is likely to be the “head office” for a wave of takeovers.
Recent mega deals include a bid by Wal-Mart, the world’s largest retailer, to buy South Africa’s Massmart Holdings Ltd. for about $4.6 billion, which had a massive effect on the value of the rand, helping it push past R7=$1. Other recent bids include HSBC Holdings Plc which is in talks to buy a controlling stake in Nedbank Group Ltd. and a bid by Nippon Telegraph & Telephone Corp to buy Africa’s biggest technology company, Dimension Data Plc. Bloomberg says deals on the table at present are worth $15 bn.
Bloomberg reports “In the race for Africa, companies from the U.S., China, Japan and the U.K. are scrambling to buy the continent’s best assets, tapping into its growth potential and its 1 billion people in a world where returns from developed nations are faltering.”. It quotes David Shapiro, head of Sasfin Holdings Ltd.’s securities unit: “Wal-Mart’s offer is going to spark other interest.. Any deal is possible.”
If it there are takeovers elsewhere in Africa, Bloomberg feels that South Africa’s economic might, infrastructure and regulated financial markets give foreign companies the confidence to use it as a springboard into countries such as Kenya and Nigeria. Bloomberg quotes Shapiro saying that South Africa is like the “head office for the rest of Africa.. It’ll be a service centre” for expansion.
The top 10 future takeover targets in South Africa are listed as:
1. Bidvest Group Ltd: a top-quality holding company, which makes 57% of its revenue from southern Africa, owns businesses from auto dealerships to financial services. Bloomberg quotes Wayne McCurrie, of RMB Asset Management saying “Bidvest is a prime target for African growth,” and Simon Hudson-Peacock, head of specialist equities at Cape Town-based Cadiz Asset Management saying that it is a “great company with great assets,” and suggesting an Sysco Corp or similar to acquire Bidvest’s international food and catering assets.
2. Northam Platinum Ltd: Bloomberg says a Chinese company could bid for Northam to secure platinum supplies and quotes Sasfin’s Shapiro: “Its Booysendal mine is coming online soon and it could be a super asset,” adding that China may also buy coal mines in South Africa. In April it was reported that Kazakh metal producer, Eurasian Natural Resources Corp., had bought 12.2% of Northam from Mvelephanda Resources for R2.2 bn ($316 million at current prices).
3. Lonmin Plc: Resource firm Xstrata Plc already owns 25% and Hudson-Peacock of Cadiz was quoted as saying “may want to capitalize” on gains in Lonmin’s share price since it originally bought the stake, by selling the holding to another company.
4. Barloworld Ltd: the world’s largest fork-lift truck dealer; was founded in Durban more than 100 years ago and and sells machinery made by Caterpillar Inc. RMB’s McCurrie is quoted as describing it as “nicely exposed to Africa”.
5. Aspen Pharmacare Holdings Ltd: the southern hemisphere’s biggest generics drug-maker;
6. AECI Ltd: a chemicals company
7. Tiger Brands Ltd: a food distributor, failed in 2009 to buy its largest rival AVI Ltd and has been making acquisitions outside South Africa, but could be a “good play”, particularly for bulls of soft commodities, i.e. who think that, as people and countries get richer, they will spend more on food.
8. Blue Label Telecoms Ltd: The company describes itself as “a distributor of prepaid secure electronic tokens of value and transactional services within the global economies”.
9. Business Connexion Ltd: Telkom SA’s bid to take over this computer-services company was. blocked by regulators, may be attractive to a company like International Business Machines Corp.
The report adds that retailers Shoprite Holdings Ltd. and Pick n Pay Stores Ltd. could lure bids from Carrefour SA or Tesco Plc, according to Stephen Carrott, analyst at Macquarie Group Ltd. Shoprite has 124 supermarkets outside South Africa and plans to add another 20 in Nigeria over the next 2 years, is described as an “excellent” potential acquisition.
There have already been a few massive takeovers of companies expanding into Africa. One of the giant investments was when India’s Bharti Airtel Ltd. paid $9 bn to purchase the African assets of Kuwait’s Mobile Telecommunications Co., and gain access to 15 African markets. Previously it had failed in merger talks with MTN Group Ltd., the continent’s largest mobile-phone operator.


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