M&A In Africa: Foreign Investors Eye Nigerian Companies As Equity Valuations Drop

M&A In Africa: Foreign Investors Eye Nigerian Companies As Equity Valuations Drop

From Bloomberg

Nigerian companies will become acquisition targets by the end of 2015 as foreign investors seek to take advantage of a slump in equity valuations caused by the falling oil price, according to law firm Baker & McKenzie.

Investors from China to South Africa are interested in Nigerian industries including agriculture and mining because “prices are favorable” in Africa’s largest crude producer and the government will probably seek to diversify away from oil, Baker & McKenzie analysts led by Chris Hogan said in a Jan. 29 interview in Lagos, Nigeria’s commercial capital.

“As valuations of companies fall, they become targets for investments, acquisition or takeover by foreign players and large local companies,” said Hogan, who is a partner at the London-based firm. Baker & McKenzie advised on First Bank of Nigeria’s $450 million Eurobond issuance last year, according to Hogan.

Nigerian company valuations are falling as Africa’s biggest economy struggles to cope with a more than 50 percent drop in the price of oil since June, reducing income. The Nigerian Stock Exchange All Share Index is down 15 percent this year, the most among 93 primary global indexes tracked by Bloomberg.

Diamond Bank Plc is the country’s biggest loser this year, retreating 37 percent. Dangote Flour Mills Nigeria Plc is second with a 34 percent fall, while Guinness Nigeria Plc, a unit of London-based drinks company Diageo Plc, has declined 23 percent.

Seeking Partnerships

Baker & McKenzie has held talks with Chinese investors about equity-partnership opportunities with Nigerian companies operating in power, ports and transport, analyst Frances Okosi said in the same interview, without giving details. The firm has also received interest from South African companies “looking to expand in manufacturing, fast-moving consumer goods and real estate” when the Nigerian economy begins to stabilize, according to Hogan.

Read more at Bloomberg