Mergers, acquisitions seen strong in power, mining, infrastructure sectors

MANILA, Philippines - Merger and acquisition deals are forecast to be particularly strong in the power, mining, and infrastructure sectors as companies with cash to spare or access to financing, actively seek acquisition targets as they feel the pressure to invest in future growth, according to a leading investment bank.

UBS Philippines managing director Lauro Baja said the country’s strong macroeconomic fundamentals, regional economic integration and improved business prospects are driving renewed interest in new listings and mergers and acquisitions.

Baja said that while the global crisis has dented the confidence of markets, the pipeline of IPOs (initial public offerings) and M&A deals is building up and that the Philippines may likely witness a resurgence of the market in the next 12 months.

Companies that had been cautious before are testing the waters once again as new capital starts flowing, Baja said.

“We opened the year a little bit volatile because of the global macroeconomic environment but since the Philippines is doing well, there will be good deals coming out of the Philippines in the next six to 12 months, particularly in the energy, infrastructure and mining industries, Baja said.

He also finds tourism interesting with more companies making a big splash in the sector.

Baja said companies may continue to use merger or acquisition strategies to generate increased shareholder value.

Companies with strong assets but weak balance sheets will likely continue to work on their financial position, creating a favorable future environment for future M&As, he noted.

The power utilities sector is seen to witness a landmark change in the next decade with generation of renewable energy becoming the next big thing due to rising energy security pressures. The infrastructure space is also expected to be the next big thing for Philippine companies as the government wants more private sector participation in building airports, seaports, bridges, highways, electrical power systems and waste water treatment plants. 

On new listings, Baja said San Miguel Global Power Corp., the energy arm of diversifying conglomerate San Miguel Corp., is among the companies that are slated to go public in the next six to 12 months. 

UBS, along with Goldman Sachs, Standard Chartered Bank, ATR Kim-Eng Financial Corp. and SB Capital Corp. were given the mandate to act as lead underwriters of the proposed issue, which is expected to fetch around $500 million.

Baja said now is the time to invest in the stock market given a rebound in the US and Europe, the largest markets and continued growth in emerging economies.

“Investors are investing. Deals that have been done are performing well and the macro story for the country looks positive, he said.

UBS has been the top arranger of stock sales over the past five years, cornering a 65-percent share of the local market or $5.05 billion of the total $7.7 billion raised.

It is also the leading investment bank for Philippine corporate debt transactions from 2006 to 2011, accounting for 28.2 percent of total deals.

UBS is consistently ranked among the worlds top financial institutions and received numerous independent industry accolades. In the Philippines, it was voted the Best Foreign Investment bank by Finance Asia (2004,2006, 2007 and 2010) and The Asset (2003 and 2004). It was also named the Best Equity House and Best Debt House by Euromoney and The Asset.