The Kuwait Stock Exchange announced today that Injazat have agreed in matter of principle to buy 51-100% of ‘Aqaar. The deal is pending the approval of the shareholders from both sides, and the allocation of a fair price. The shareholders of ‘Aqaar who opt to sell their shares must use the proceeds and participate in Injazat’s capital raise.

It is very interesting to see that two companies might merge soon. We have been hearing talk that companies must eventually consolidate to survive, and I guess it is happening. Usually once investors perceive a recovery in the markets, M&A activity starts to boom. Strong companies with healthy balance sheets (a lot of cash and low leverage) usually buy smaller companies that are having trouble. This happens because the aquirer wants either a bigger market share or exposure to a new product or new market. Also, during that time valuations are low, so they can buy other companies at a discount.

A boom in the M&A market is a healthy sign that the recovery is well on its way, and it usually produces stronger companies in the end. However, in Kuwait and the region, we haven’t seen much M&A activity, especially given that many companies were hit hard by the crisis. I hope this deal is one of many that will produce stronger companies to compete regionally and globally.

Tags: 'Aqaar, Acquisitions, Injazat, KSE, Kuwait, Kuwait Stock Exchange, M&A, Mergers

This entry was posted on Thursday, April 1st, 2010 at 9:25 am and is filed under Kuwait. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.