The Cayman Islands saw more mergers and acquisition transactions than any other offshore jurisdiction in the first half of 2018, as the total value of Cayman deals increased by nearly 50 percent over the second half of 2017.
However, Cayman mirrored other offshore centers with a slight drop in the volume and an increase in transaction value, according to a report by offshore law firm Appleby.
“It is good to see Cayman remain the busiest offshore jurisdiction for dealmaking to start off the year,” said Simon Raftopoulos, partner and group head of Appleby’s private equity practice in the Cayman Islands. “Despite a dip in the number of local deals when compared to the second half of 2017, Cayman experienced a significant rise in deal value and was home to four of the 10 largest deals of 2018 thus far.”
Cayman-incorporated companies were the target of 421 transactions worth a combined US$60.9 billion in the first half of 2018. This represented 31 percent of all offshore deals and 28 percent of total offshore deal value during that time.
Transactions were down 9 percent from the second half of 2017, while deal value was up 49 percent.
The higher deal value is caused by Cayman being the home to four of the 10 largest offshore deals in the first six months of the year.
They were a US$9.8 billion minority stake sale of Tencent Holdings Ltd. by Naspers Ltd., a separate $9.36 billion minority stake sale of Tencent Holdings by JP Morgan, a $4.58 billion capital increase by Softbank Group Corporation in Xiaoju Kuaizhi Inc. and a US$2.3 billion capital increase by China Evergrande Group.
Offshore M&A deals down 10 percent
A total of 1,344 offshore M&A deals recorded in the first half of 2018 equated to a 10-percent decline compared to the last six months of 2017. However, the total deal value of $216 billion marked a 68-percent jump over the second half of last year.
It was driven in part by the $62 billion acquisition of Jersey-incorporated Shire PLC by Japan’s Takeda Pharmaceutical. Each of the offshore region’s 10 biggest deals was worth more than $2 billion.
The most frequent types of deals were acquisitions, capital increases and minority stakes in other companies. Typically, these three categories have been fairly balanced but the last 18 months have seen acquisitions move notably ahead to where they now make up 40 percent of all deals, Appleby’s Offshore-i report noted.
In terms of deal activity, Cayman was followed by Hong Kong (334 deals), the British Virgin Islands (236 deals) and Bermuda (146 deals). Jersey was the offshore leader in terms of total value in the first half of 2018 as a result of the Shire PLC acquisition.
Outbound transactions, in which offshore companies acquire companies onshore, reached combined value of $187 billion in 1,640 deals during the first six months.
Companies in China, the U.S. and the U.K. were the main targets followed by Australia and Singapore. Western Europe also saw a high concentration of billion-dollar deals with Finland, Italy, Luxembourg, Spain, Switzerland and the U.K. all recipients of high-value offshore attention.
The top 10 outbound deals were each worth more than $3 billion and include the purchase of Patrón Spirits International AG, maker of the popular Patrón tequila, by global spirits giant Bacardi, which is headquartered in Bermuda. Half of the top 10 targets were data processing companies.
Initial public offerings
The record activity around offshore IPOs in 2017 continued in 2018, with 180 companies announcing their intention to go public in the first half of the year.
Offshore IPOs typically occur on U.S., London or Hong Kong stock exchanges, with Hong Kong being an especially popular choice for the Cayman Islands. Cayman is by far the busiest jurisdiction for IPOs involving offshore companies, as 71 of the 80 IPOs completed in the first half of 2018 involved Cayman entities.
The Offshore-i report covers all deal types except joint ventures and share buybacks in Bermuda, British Virgin Islands, Cayman Islands, Hong Kong, Guernsey, Jersey, Isle of Man, Mauritius and Seychelles.