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M&A: Chemical industry unrivaled in Russia's M&A market in May

Only three economy sectors accounted for more than 80% of the total Russian M&A market in May 2014. The chemical and petrochemical industry outclassed other sectors contributing only 2 transactions, but their combined amount reached $1.5 billion (34.4% of the total market volume for the month). The acquisition by Rosneft of the SANORS petrochemical holding (estimated at $1 billion) announced in May was the largest M&A event in the sector, according to the recent issue of AK&M Information Agency's monthly bulletin MERGERS AND ACQUISITIONS MARKET (no. 195).

Owing to this powerful contribution, the total amount of transactions in the sector for January-May 2014 soared more than 10 times year-on-year. However, even without the recent high-priced deal, the average transaction value (excluding the largest M&A event) is 4.6 times above last year's level. Pharmaceutics is the most M&A active part of the chemical sector.

Financial institutions secure the second position in May with 7 transactions for a total of $1.26 billion (28.9% of the total market volume). The highlight of the month here was the transfer of MOSOBLBANK, Inresbank, Finance Business Bank to SPM Bank pursuant to a turnaround plan.

The total amount of M&A events for the 5-month period in 2014 increased 2.8 times year-on-year. The number of transactions increased by 28%, the average deal value 2.1 times. The upsurge of the M&A activity is was driven by the ongoing consolidation in the banking sector.

Mineral production stands third in the raking of M&A active economy sectors (5 transactions for a total of $784 million, 18% of the market volume). The largest deal here was the purchase of the Kyzyl project deposits in Kazakhstan by Polymetal. Owing to this transaction, the total M&A market volume in the sector for the five months of 2014 is only 10% below the result achieved for the whole year 2013.

Two more economy sectors landed on the list of the most successful M&A contributors far below the three leaders. Electric power ranked fourth with 2 transactions for a total amount of $279.5 million (6.4% of the M&A market volume took place) including the transfer of a controlling stake in Macedonia-based TE-TO AD Skopje power plant to TGC-2 for $276.4 million, the biggest M&A event in the sector in nine months. However, this seems to be a momentary success against the otherwise dim M&A background in the sector, an after-effect of the regulatory uncertainty in the sector and the lower financial performance of companies.

The services sector rounded out the Top 5 in May with 2 transactions worth $136.2 million, 3.1% of the total market volume, the largest of them being the acquisition of 64% of the shares in OJSC Olimpiyskiy Sports Complex by CJSC Neftegazprod from the government of Moscow for $134.5 million.

Today, the M&A activity is growing appreciably only in the financial sector, the oil and gas production segment and the chemical industry (including pharmaceutics). The M&A tide also rose in the mechanical engineering sector as June saw the biggest deal in two and a half years: the Renault-Nissan alliance secured a controlling stake in AvtoVAZ spending $742 million on it.

At the same time, the one-time highly M&A active sectors such as construction and development or information technology witness a significant decline in the M&A activity in May 2014. In particular, the IT sector did not contribute a single transaction for the first time in six months. The total M&A market volume in the sector for January-April 2014 increased by a mere 11.7% year-on-year although it used to double annually in previous years.

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"AK&M", 14.07.2014


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