2012 was a lucrative year for deal makers as mergers and acquisitions rose thanks to an improved business environment in the region. The discovery of oil and gas also attracted investors to Uganda, Kenya and Tanzania.

Dundee Capital Markets, a Canadian investment dealer predicts a fresh round of mergers and acquisitions in the oil exploration business in 2013 because with increased activity, relatively smaller explorers with material acreage positions are becoming targets for big companies.

A survey by consulting firm Deloitte showed that private equity funds’ appetite for East African investment rose to an all-time high in 2012.

The main target was high-growth small and medium enterprises in consumer-driven sectors as well as infrastructure, real estate, healthcare, agribusiness and green energy. The region is expected to surpass the $200 million worth of investment recorded by private equity firms in 2011.

A survey of global M&A deals by Ernst & Young shows activity was up 10 per cent in the first quarter of 2012, after plummeting to its lowest level in two years, with Africa experiencing a rise.

Within that period, there were 12 M&A deals with a total value of $3 billion completed or announced — the highest in the first three months of any year — compared with six deals worth $17 million over a similar period a year ago, according to Thomson One Banker, which provides financial data on public companies.

READ: Oil, gas sectors fuel region’s record M&A deals

Deals gone sour

But not all mergers and acquisitions went well. A case in point is the planned acquisition of listed oil marketer KenolKobil by Puma Energy, the Swiss trader, which is fighting a suit in the High Court after employees moved to block the deal. The status of the deal remains unknown.

The year also saw a sharp rise in foreign direct investment. Kenya, for example, beat continental economic giants Nigeria, South Africa and Morocco in the rate of growth of new foreign investments, according to the FDI 2012 report published by FDI Intelligence, a specialist research agency of the Financial Times. Kenya recorded a 77 per cent rise in FDI projects last year, from 31 in 2010. It received 55 projects in 2011.

The year also saw an increasing number of companies operating in the East African region turn to rights issues to grow their balance sheets, due to the high costs of borrowing. A rights issue is a way of raising new cash by offering shareholders stocks in proportion to their current holdings.

The following are some of the major deals that defined 2012:

KENYA

Acquisition: Java House (Kenya) by Emerging Capital Partners (US) - May
Deal value: Undisclosed

Emerging Capital Partners (ECP), an American private equity firm, bought a majority stake in Nairobi Java House to inject new capital that will enable the 13-year-old coffee chain to expand across Kenya and the East Africa region.

READ: Java deal lands ECP Africa investor award

Java’s managing director Kevin Ashley, said the business has recorded an annual growth of between 30 per cent and 40 per cent in the past five years, with turnover touching $11.75 million in the year ended June 2011. The deal value was not disclosed. The coffee house is expanding to meet the consumption demands of the expanding middle class in the region.

IPO: Longhorn Kenya - May
Value: $14.2 million

Longhorn Kenya became the first publishing company in Kenya to list at the Nairobi Securities Exchange, after selling 58.5 million of its ordinary shares in by introduction. The publisher’s shares have been listed on the Alternative Investment Market Segment (AIMS) of the NSE.

Early in the year, Longhorn announced that its revenues more than doubled to $12 million for the year ended June 2011 from $6.2 million in 2010, on the back of an aggressive sales strategy of textbooks in Kenya and other countries in the region. The publisher has a presence in Kenya, Tanzania, Rwanda, Malawi and Uganda. In January 2012, Longhorn Kenya bought Delah Publishers based in Dar-es-Salaam for $147,128.

Capital: UAP sells shares to three PE groups - June
Deal value: $54.8 million

UAP Insurance Group raised $54.8 million from the sale of shares to three private equity funds, Aureos Africa Fund, AfricInvest Fund and Swedfund International AB. The money will finance the company’s expansion in the region. The deal guaranteed the three private equity funds shares equivalent to a 40 per cent stake.

Rights issue: Kenya Airways - June
Value: $172.6 million

Kenya Airways raised Ksh14.5 billion ($172.6 million) through a rights issue in June from existing and new shareholders, achieving a 70 per cent subscription. The airline had hoped to raise Ksh20.68 billion ($246.2 million) by floating an additional 1.5 billion new ordinary shares.

The proceeds of the issue will finance part of the airline’s 10-year ambitious growth and expansion strategy, whose total cost is estimated at Ksh306 billion ($3.6 billion).

On November 5, KQ announced a Ksh4.8 billion ($57.2 million) half-year loss and followed up with a warning to investors that the persistence of the Eurozone crisis and insecurity at home would leave full year results at less than a quarter of last year’s outcome.

Acquisition: I&M Bank (Kenya) buys into BCR - July
Deal value: Undisclosed

Kenya’s I&M Bank and two development financial institutions acquired an 80 per cent stake in Banque Commerciale du Rwanda (BCR). The equity became available through the exit of private equity firm Actis. Other shareholders are DEG from Germany and Proparco from France. The remaining 20 per cent is held by the government of Rwanda.

This acquisition marked the third international footprint for the I&M Bank Group, which already has a presence in Mauritius (Bank One Ltd) and Tanzania (I&M Bank (T) Ltd). The deal marked the continued regional expansion of Kenya-based banks taking advantage of the high proportion of unbanked population in other East African countries including South Sudan.

Merger: Barclays Africa operations, Absa enter deal - August
Deal value: $2.1 billion

Further to the announcement on August 21, South Africa’s biggest retail bank Absa, majority-owned by Barclays Plc, announced it had reached an all-share deal to acquire the British bank’s operations in Africa.

The strategy is to operate as one bank in Africa‚ which is expected to merge Barclays interests in Botswana‚ Ghana‚ Kenya‚ Tanzania‚ Uganda‚ Zambia and the Indian Ocean with Absa. Barclays Bank Plc will remain the majority shareholder of the combined African operations. Barclays is expected to raise its stake in Absa to 62.3 per cent from 55.5 per cent with the conclusion of the $2.1 billion deal.

Rights issue: NIC Bank (Kenya) - October
Deal value: $100 million

NIC Bank held a rights issue that saw the offer oversubscribed by 238 per cent to raise $82.3 million. The proceeds from the issue will fund the bank’s regional expansion plan and upgrade its core banking system.

Fundraising: Catalyst Principal Partners (Kenya) - October
Deal value: $125 million

Kenyan private equity house Catalyst Principal Partners raised $125 million to invest in the East African region over the next four years. The Catalyst Fund will be invested in a range of consumer growth-related opportunities. Investments will target emerging regional consumers and companies that export within the region.

Catalyst will put the fund into consumer goods, retail, technology, services, manufacturing and engineering, with investments of between $5 million and $20 million per deal. The new fund will target investments in Kenya, Uganda, Tanzania, Ethiopia, Rwanda and the Democratic Republic of Congo. Some of the first deals are expected to be closed in the first quarter of 2013, the fund’s officials said.

Merger: Mercantile Insurance, Saham (Morocco) - October
Deal value: $3.5 million

Saham Finances SA, a Morocco-based insurance holding company with operations in 15 African countries through ownership of 20 insurance companies acquired a majority shareholding in the Kenyan company, Mercantile Insurance.

Documents filed by the regulator indicate that the deal was by way of a share purchase agreement with the shareholders of Mercantile Insurance in which Saham acquired 66.67 per cent stake. The company now owns 15 million shares in Mercantile Insurance.

Shares sold at Ksh20 each meaning the deal was worth Ksh300 million ($3.5 million). The company’s total issued share capital is 22.5 million shares.

Share sale: Three equity firms sell stake in Family Bank - November
Deal value: Undisclosed

Three private equity funds sold a 22.3 per cent stake in Family Bank to Kenya Tea Development Agency and Laptrust, the pension fund for local authorities, more than two years after they bought the stake for Ksh916 million ($10.9 million). The three funds — Tunis-based AfricInvest, Netherlands’ FMO and Norway’s Norfund — sold the stake for an undisclosed fee.

Laptrust will own 7.3 per cent (10 million shares) and KTDA 15 per cent (42.7 million shares), making the tea agency the second largest shareholder in Family Bank after the family of outgoing chairman Titus Muya, which has a combined stake of more than 30 per cent.

Family Bank held a rights issue to raise Ksh1.2 million ($14.7 million) from its existing shareholders in an offer that closed December 7. The bank said it also wants to raise its capital to participate in mega projects in geothermal energy, oil and gas exploration as well as road construction.

IPO: UAP Holdings - November
Deal Value: $7.2 million

UAP Holdings raised $7.2 million additional capital through an initial public offering at the Nairobi Securities Exchange. The company offloaded 12.5 million shares at an offer price of $0.7 each, which will be traded on the Over-the-Counter (OTC) market. The money will finance the company’s expansion in Rwanda, South Sudan, Tanzania and Democratic Republic of Congo.

In Rwanda, the company plans to acquire a local insurance company and fund real estate projects in Kenya, Uganda and South Sudan. UAP is planning a 12-storey office block in Juba in a joint venture with the South Sudan government estimated at $9.9 million and a business park in Kampala worth $17.8 million.

Rights issue: Standard Chartered Bank Kenya - November
Deal value: $100 million

Standard Chartered Bank Kenya, a subsidiary of Standard Chartered Bank PLC had a successful right issue that saw the offer oversubscribed by 158 per cent. The bank’s issue raised over $100 million from the sales of 22,082,856 new shares. The funds are expected to provide additional capital to help the bank meet any impending regulatory changes that may include rises in minimum capital requirements.

Rights issue: CfC Stanbic Holdings (Kenya) - November
Deal value: $59 million

CfC Stanbic Holdings held a rights issue that was oversubscribed by 112 per cent, raising $59 million. CfC Stanbic Holdings Chairman Fred Ojiambo said the proceeds from the cash-call would help boost the financial services firm’s business in Kenya and South Sudan.

“Our strategy for the Group is to change the funding mix to raise the proportion of funding that comes from customer deposits in order to lower the cost of funding." The financial-services firm issued an additional 121.7 million shares to existing shareholders.

UGANDA

Farm down: Tullow cedes some assets to Total, CNOOC - February
Deal value: $2.9 billion

Tullow Oil transferred part of its assets to French company Total and the Chinese National Offshore Oil Corporation (CNOOC). Tullow transferred 66.6 per cent of its assets in a transaction considered to be worth about $2.9 billion.

The deal got the green light after the government of Uganda signed Production Sharing Agreements and the production licence for the Kingfisher oil field with Tullow Oil Uganda. The deal, similar to one entered into with France’s Total SA, was intended to secure capital for commercial oil production in the Albertine Graben that is expected to kick off after 2015.

READ: Landmark deal means Uganda’s oil to flow in 2015

Under the farm-down arrangement, Tullow ceded a part of its stake to the two oil majors ahead of the commercial production programme estimated to cost $10 billion.

Deal: MAP IT and Satnav East Africa - April
Deal value: $2.6 million

MAP IT, a South African based supplier of transmission masts and navigation software purchased a 26 per cent stake in Satnav East Africa, a Ugandan owned navigation services provider in April . The transaction was valued at $2.6 million. The deal was motivated by MAP IT’s desire to expand outside South Africa at a time of mounting competition in the domestic market.

In comparison, Satnav’s divestiture of minority shares from its books has enabled it to acquire highly advanced navigation equipment necessary for rolling out location tracking products suitable for homes and businesses, industry sources say.

Deal: Ireland Blythe (Mauritius) buys into Quality Cuts Ugandan - July
Deal value: Undisclosed

Ireland Blythe acquired a 50 per cent share in Quality Cuts Uganda Ltd, a leading supplier of fresh meat in local supermarkets. The transaction value has not yet been confirmed. Ireland Blythe’s superior experience in the business is expected to boost Quality Cuts’ supply chain, which has been affected by low quality animals procured from Ugandan farmers with little exposure to sophisticated markets.

Quality Cuts also expects stronger growth in its distribution network but expansion in regional markets like Rwanda is dependent on penetration by large supermarket chains like Nakumatt.

IPO: Umeme (Uganda) - November
Deal value:  $64 million

Umeme Ltd, Uganda’s sole power distributor, offered 38 per cent of its shares to the public in an initial public offering valued at $69 million in October and November. Umeme’s shares were sold at Ush275 ($0.1) to retail investors and Ush250 ($0.09) to foreign institutional investors with 622,378,000 available for sale.

The IPO was oversubscribed by around 36 per cent, with retail investors receiving full allocation for shares applied for. Umeme’s shares were listed on the Uganda Securities Exchange on November 30 and crosslisted by introduction on the Nairobi Securities Exchange early December.

Proceeds from the IPO will enable Umeme to pay off an outstanding loan of $27 million owed to Actis, its majority shareholder, and also expand its distribution network.

Rights issue: Uganda’s NIC - December
Deal value: To be disclosed

Earlier this month, Uganda’s National Insurance Corporation became the latest listed firm to announce it was going to sell shares to current investors at a price it is yet to disclose. NIC created 1.4 billion shares increasing its authorised share capital to Ush10 billion ($3.875 million) from Ush3 billion ($1.162 million) during its annual general meeting in September last year. The firm is banking on the rights issue to grow its capital.

Crested Stocks & Securities from Uganda will be the lead transaction advisor and sponsoring broker while Standard Investment Bank from Kenya will assist as transaction advisor.

RWANDA

Acquisition: Unibra takes over Brasserie des Mille Collines - October
Deal value: Undisclosed

Belgian brewery Unibra took over full ownership of Brasserie de Mille Collines, manufacturer of Skol beer, at an undisclosed fee.

Following the takeover on October 19, the new owners said they intend to inject in excess of $15 million into the expansion of the brewery, which manufactures 100,000 hectolitres of beer every year, to exploit the growing demand in Rwanda’s beer market.

READ: Belgium-based firm Unibra invests Rwf9.4b in Skol brewery

Unibra, which used to jointly own BMC along with a consortium of local investors, will now focus on trying to break the dominance of Bralirwa, a subsidiary of Heineken Company. The firm also faces competition from regional players including Kenya’s EABL and Uganda’s Nile Breweries in a market where demand for beer products stands at 1.2 million hectolitres annually.

Acquisition: RTI takes over Mulindi and Shagasha Tea Factories - October
Deal value: $9 million
Rwanda Tea Investment took over two Rwandan tea factories –Shagasha and Mulindi. Tea production and farmers’ incomes are expected to rise following the $9 million deal inked between the government and the UK-based firm.

The new investor, who will jointly own the factories with farmers, is expected to increase tea production for export and the local market, raising optimism that the country will attain a combined output of 41,873 tonnes of tea by 2017 and export earnings of $147 million.

Production at the two tea factories is expected to double to 4,366 tonnes annually.

Acquisition: Pretoria Portland Cement buys 51pc stake in Cimerwa - December
Deal value: $69.4 million

Cimerwa Ltd, Rwanda’s sole cement manufacturer received a new lease of life after South Africa’s Pretoria Portland Cement (PPC) acquired a 51 per cent in stake in a $69.4 million deal.

Desperate to raise resources for increasing its cement output sixfolds from the current 100,000 tonnes annually, Cimerwa had sought various cash raising methods including an attempt to secure a line of credit of up to Rwf18.9 billion ($29.9 million) from the African Development Bank (AfDB) before the deal materialised.

READ: South African giant PPC breathes life into Cimerwa

AfDB withdrew the pledge, forcing Cimerwa to turn to local banks for a syndicated loan. Cimerwa also mooted a deal to issue a corporate bond but analysts warned this would not appeal to inventors.

FDI: Ngali Energy
Deal value: $146 million

Rwanda’Ngali Energy (Digitech) invested $146 million in a hydropower project expected to boost electricity generation in the country. This was the second largest investment registered by the Rwanda Development Board. It is a huge boost to Rwanda, which is desperate to increase renewable sources of energy as it seeks to reduce the use of wood fuel — the country’s main source of energy — from 85 per cent to 55 per cent by 2017.

FDI: Property Mode fills housing gap
Deal value: $40 million

With 50 per cent of Kigali residents still living in overcrowded and low-quality houses, real estate firm Property Mode Rwanda Ltd entered the local Rwandan market seeking to fill the gap in the sector.

With a housing shortage of 400,000 houses, the $40 million investment by Property Mode Rwanda is a sigh of relief for Kigali City Council authorities and residents. With such an investment, including the one of $25.5 million by local investor SRB Investment and Holding Ltd, Kigali should be able to provide the 186,163 housing units needed for low-income earners in the next few years.

TANZANIA

Private Equity: StanChart PE, Export Trading Group (Tanzania) - November
Deal value: $74 million

Standard Chartered Bank Africa’s Private Equity division acquired a minority stake in Tanzania-based agribusiness Export Trading Group (ETG) for $74 million. The deal placed a $500 million value on the company. The investment was made through its holding company ETG Mauritius.

ETG will use the funds to further support its expansion plans, both in its current core markets and in new geographical regions. The deal was originated through the private equity team’s parent company Standard Chartered Bank, whose credit arm has previously provided debt to the company.

In 2010, the bank provided a $120 million structured soft commodity syndicated loan to ETG, alongside the International Finance Corporation and OPEC Fund for International Development.

Rights issue: Dar es Salaam Community Bank - November
Deal value: $9.3 million

Dar es Salaam Community Bank (DCB) is seeking to raise Tsh14.64 billion ($9.3 million) through a rights issue at the Dar es Salaam Securities Exchange. DCB Bank wants to finance its expansion plans, including converting into a fully fledged commercial bank from a community bank. The bank was offering 38,547,951 shares sold at a discounted price of Tsh380 ($0.2) per share.

Acquisition: Key Petroleum sells stake to Bounty Oil and Gas - November
Deal value: $250,000

Key Petroleum sold its Tanzanian assets to Bounty Oil and Gas. These include Key’s 5 per cent interest in the Kiliwani North Development License and its Tanzanian subsidiary Funguo Petroleum. Bounty paid $250,000 cash to Key, of which $205,480 was allocated to the development costs of the Kiliwani North Development License.

READ: Australian firm sells oil interests in Tanzania

The remaining cash balance of $44,470 was paid directly to Key. An additional consideration of $162,118 in ordinary shares was issued and allotted to Key as part of this transaction.

By Steve Mbogo, Mwaura Kimani, Bernard Busuulwa and John Gahamanyi.