Mergers and acquisition activity continued its recovery in 2004, with BEE deals providing a now customary boost to liven “a controversial year”, according to the 14th Ernst & Young mergers and acquisitions survey.
The survey found that in 2004 the number of mergers and acquisitions deals increased from 790 to 823. The value of deals rose from R150-billion to R177,4-billion.
Empowerment, a driver of mergers and acquisitions for the past few years, weighed in heavily once more.
The number of BEE deals rose by 29% from 189 to 244. In 2004 empowerment deals stood at R52,9-billion, up from R42,2-billion. Last week the BusinessMap Foundation set the value of BEE deals at R62-billion.
Dave Thyser, a partner at Ernst & Young, characterised 2004 as a controversial year, one in which the debate over whether BEE is “empowerment of the masses” or “enrichment of the few” raged anew and a R6,6-billion deal featured prominently in dinner table talk.
The deal was a sale by the Thintana consortium of a 15,1% stake in Telkom to the Elephant empowerment consortium, which comprises individuals connected to the African National Congress. The stake is currently warehoused by the Public Investments Corporation.
The deal was ranked second in value in BEE transactions. The biggest deal was a 10% acquisition of FirstRand by an empowerment consortium for R7,8-billion.
The survey has ranked the proposed merger of Sasol and Engen to form Uhambo Oil as the largest transaction. It is being considered by competition authorities but Ernst & Young have conservatively estimated its value at R12-billion. This values the empowerment component of the deal, a 25% acquisition, at R3-billion.
The FirstRand and Thintana deals were, respectively, the second and fourth largest overall in mergers and acquisitions. The largest was the merger of SA Chrome & Alloys with Xstrata, valued at R8,2 billion.