Cyprus M&As hit record €1.6 bln in 1H07

Mergers and acquisitions during the first half of 2007 surged to a record CYP 960 mln (EUR 1.6 bln) on the back of a sharp increase in the number of deals with all signs pointing to another bumper year following last year’s EUR 2.9 bln deals.

There were 22 deals in the first quarter and a further 27 in the second quarter, for a first-half total of 49, of which CYP 935.8 mln (EUR 1.59 bln) were in cash (98%) while CYP 22.8 or EUR 38.8 mln (2%) were financed through exchange of equity, according to exclusive Financial Mirror data.

This is in sharp contrast to 2000, when at the height of the previous bull market, EUR 221 mln or 30% of the total EUR 750 mln in M&A deals were in cash while EUR 529 mln or 70% were through equity issue.

Analysts generally agree that the higher percentage of cash deals indicates underlying strength in the equity market and its prospects, in contrast to when the majority of deals are financed through equity issues, indicating bubble conditions.

 

— Banks… centre of attraction

 

The banking sector remained the star performer attracting most of the interest. The largest M&A in 2007 was Marfin Popular Bank’s purchase of an 8.1% stake in the Bank of Cyprus from Piraeus Bank.

MPB purchased 45 mln BOCY shares at EUR 11.24 per share in a cash deal worth EUR 505.8 mln. Recently, MPB sold 2.6 mln of BOCY shares at close to EUR 12.3 per share with MPB CEO Andreas Vgenopoulos indicating during a teleconference with analysts that he no longer views the BOC stake as strategic, leading many to believe that he may decide to dispose of the stake altogether. Bank of Cyprus officials nevertheless continue to view Vgenopoulos as a threat and have rejected any suggestion to enter into any dialogue with him.

Marfin Popular Bank was also active in overseas markets with the acquisition of a 99.2% stake in Marine Transport Bank – Ukraine for USD 137.4 mln (EUR 103.3 mln), as well as three subsidiaries of the Ukrainian bank for a further USD 0.7 mln.

In February, Marfin disposed of its 7.17% stake in Hellenic Bank to the Church of Cyprus at EUR 3.20 per share in a deal valued by the Financial Mirror at EUR 61.4 mln.

 

— Property under spotlight

 

The property sector, especially luxury development in the coastal area of Paphos, was also in the spotlight through two major deals that sent other property shares higher and has led many local developers to consider going public in order to fetch similar valuations.

The largest property deal and the second largest of the year’s first half was the purchase by Dolphin Capital, a Cypriot owned company listed in the UK, of Aristo Developers (ARD) from Theodoros Aristodimou, the Elma Group and through a public offer at EUR 2.15 cash per share for a total value of EUR 285.9 mln.

The next major deal involved the purchase of a controlling stake in Lanitis Development, the owner/manager of the Aphrodite Hills luxury golf resort project by Thalassa at EUR 2.31 per LDL share in a deal valued at EUR 125.2 mln.

The valuable and strategically located property holdings of Woolworth Cyprus Properties was the reason why Cyprus Trading Corp. (CTC) with the backing and support of NK Shacolas Holdings is bidding to acquire full control of FWW at EUR 1.45 per share in cash in a deal valued at EUR 118 mln.

 

— Most active

 

Andreas Vgenopoulos was the most active deal maker of the first half with eight successful M&As plus one unsuccessful bid, followed by Lambros Christophi of Aspis Holdings with six successful M&As and one pending, while Nicos Shacolas is in third place with four successful M&As.

The massive increase in interest for Cypriot listed companies has been one of the reasons why the equity market recorded a highly satisfactory 25% return in the first half, which in the process has created an additional EUR 8 bln in new wealth, taking the total market cap of all CSE listed stocks to EUR 20.5 bln, according to Financial Mirror data.

 

— Global increase in M&As

 

Cyprus is following the global M&A craze affecting all markets, with data from Thomson Financial showing that global corporate merger activity in the first half of 2007 surged 53% to a record-high $2.5 trln as Europe equalled the United States for the first time in four years.

The mega-deals more common in the U.S. have reached Europe on a more regular basis, including the $97 bln proposed takeover of Dutch bank ABN AMRO and the $22 bln leveraged buyout of pharmacy chain owner Alliance Boots.

European deal activity increased 73% in the first half to $1.02 trln while the U.S. gained 45% to $1.03 trln.

The Netherlands was the most targeted country in European M&As in the first half with a total of $258 bln, but Britain claimed the most deals with 1,261, valued at $173 bln.

European deals by private equity firms, which have faced heavy criticism in recent months for the amount of debt they use and other aspects of their business model, increased by 28% to $133 bln. But strategic buyer acquisitions during the period doubled in the region from a year ago to $828 bln.

By sector, consumer staples activity tripled to $172 bln globally while telecoms decreased 42% to $119 bln. The financial services industry saw the most deal volume with $542 bln in the first half, Thomson Financial said.