M&A seen in food supply, oil and gas

PETALING JAYA: The merger and acquisition (M&A) trend in Malaysia going forward will likely see consolidations involving sectors such as food supply chain as well as oil and gas.

Mergermarket research correspondent Tony Goh said “it is possible to see consolidation of food supply chains with government-linked companies, such as Felda taking the lead in ramping up food production.

“Oil and gas service providers will be encouraged by state-owned entity Petronas and lenders or financial institutions providing funding to merge or consolidate to cut costs as job flow slows.”

Currently, many existing M&A deals have been delayed or postponed by at least three months or more. Over the next 12 to 18 months, most potential buyers will be adopting a wait and see approach.

Goh reckons that sectors that remain attractive for M&A deals are those in consumer staples like food and food ingredients manufacturers, which are likely to be least affected in terms of demand.

Additionally, logistic assets like warehousing and e-commerce are also attracting interest. Mergermarket recently reported that Southeast Asia recorded its highest deal value in the first quarter of 2020 (Q1’20), generating a total of Us$24.5bil across 77 deals.

This marked the highest quarterly deal value since 2001, bucking the slowdown trend in most of the Asia Pacific region amid the ongoing Covid-19 pandemic.

However, figures were largely propped up by the Us$10.6bil proposed acquisition of Tesco stores in Thailand and Malaysia by Charoen Pokphand – the largest deal in the Asia Pacific in Q1’20.

Excluding this transaction, South-east Asia M&A deal making slowed down in February and plummeted in March.

Meanwhile, private equity (PE) deal making in Southeast Asia failed to pick up in the first quarter this year, also due to the lockdowns and operation issues caused by the Covid-19 pandemic.

However, Mergermarket noted signs of increasing PE activity in areas such as pharmaceutical, medical and biotechnology sectors, driven by gaps between healthcare supply and demand.

The largest M&A deal during the quarter which involved a Malaysian bidder was floating production, storage and offloading (FPSO) provider Yinson Holdings Bhd’s acquisition of 86.08% stake in Singapore’s Ezion Holdings Ltd for Us$523mil.

This is followed by plantation company Kuala Lumpur Kepong Bhd’s Us$78mil deal for 60% equity in Indonesia’s PT Pinang Witmas Sejati.