Friday 22 June 2018

EFG Hermes attracts buyout interest

Cairo, June 1, 2012

An Egyptian businessman and a group of Gulf investors have made a buyout approach to Egypt's biggest investment bank, EFG Hermes, one of their representatives said on Thursday.

Egyptian share prices have tumbled since the uprising that ousted President Hosni Mubarak last year, and many investors have been looking to snap up assets seen as undervalued. EFG's shares have more than halved in that time.

The bank came under further pressure on Wednesday, when its two chief executives, Hassan Heikal and Yasser El Mallawany, were referred to trial alongside Mubarak's two sons as part of a probe into illegal share dealings. EFG said it would defend the two CEOs.

EFG had a market value of $839.1 million at the close of trade on Wednesday, according to Reuters data.

Cairo-based EFG - which is in the midst of forming a joint venture with Qatar's QInvest - released news of the approach in a letter to the Egyptian stock exchange on Thursday.

"A solid group of investors has committed to undertake the transaction, including a group Of Gulf investors and a prominent Egyptian businessman," said Sameh Mohieldin, a director at Planet IB Limited, a new company formed to buy EFG shares.

"We are not in a position now to disclose our sponsors, the equity partners or the valuation. Our intention is sincere. It's all based on the due diligence that we're going to conduct on the company," he said by telephone.

He said the investors would "work with EFG's existing team "to unlock the company's intrinsic value and position it as a universal bank with fully controlled integrated business."

EFG, which has $4.7 billion in assets under management, said it received a letter from Plant IB on Wednesday, expressing interest in a buyout to be conducted via a stock exchange tender.

That letter was signed by Ahmad Al Husseiny, until this month managing director and member of the board of Egyptian private equity firm Citadel Capital. Husseiny was not the businessman undertaking the transaction, Mohieldeen said.

Due diligence 

The letter said Planet was a special purpose vehicle to buy EFG's shares and included a "group of Arab and Egyptian investors as well as a group of prominent Egyptian bankers and experts in financial markets and direct investment".

Planet's letter did not name the investors or give a target price for EFG shares and it was not clear how any buyout would affect the QInvest deal.

"We reveal this intention of ours ... in our belief that the current share price is below the valuation that we made, based on published information and made public by way of the stock exchange," Planet's letter said.

It said the tender was contingent on Planet carrying out an appraisal and due diligence.

Any tender offer would require approval from the Egyptian regulatory authority but not from EFG management.

One analyst said the investors would have to reveal who they were quickly to convince EFG's staff and board they were serious, which might be difficult given the planned takeover by QInvest.

"Investment banking is basically only its human capital. I would expect that the staff be asked first to agree, because a deal is not just about price," said Angus Blair, chairman of Signet Institute, a think tank for the MENA region.

"Any deal is about adding long-term value to the business, and if key staff didn't like the deal and left, there would be little left to buy."

EFG said in May it had an agreement to form a region-wide investment bank with Qatar's QInvest, which would control 60 percent of the new bank and provide $250 million to increase its capital.

The takeover by QInvest was scheduled to be completed in the third quarter of 2012. EFG executives Mallawany and Heikal were due to step down, with Heikal overseeing the transition phase during the takeover, EFG said in a May 4 statement.

The two CEOs are accused of violating stock market and central bank rules to make unlawful profits through the trading of shares in Al Watany Bank of Egypt, a listed bank.

EFG's share closed 3.7 per cent higher on Thursday, while the benchmark index was nearly unchanged. – Reuters

Tags: Egypt | Cairo | investment bank | Interest rate | EFH Hermes |

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