Egyptian Tycoon Sawiris Backs $257m Bid For 20% Of EFG Hermes

EFG Hermes is one of the biggest investment banks in the Middle East.

Egyptian billionaire Naguib Sawiris is backing a $257 million bid for 20 per cent of investment bank EFG Hermes, sources said, in what could be a sign of revived investor appetite in Egypt after more than three years of economic stagnation.

EFG Hermes is one of the biggest investment banks in the Middle East and a deal to buy a major stake in it could indicate revived interest in Egypt’s equity market after years of depressed activity since the 2011 revolution.

Sawiris is one of Egypt’s highest-profile business tycoons and his family own the Orascom group of companies. He spent most of last year out of the country, but after last year’s ousting of Islamist President Mohamed Mursi he said he would spend in Egypt “like never before”.

In a statement on Thursday, investment bank Beltone Financial said it and a group of investors were seeking 20 per cent of EFG Hermes for 1.84 billion Egyptian pounds ($257.3 million), or 16 pounds per share, confirming what two sources familiar with the matter earlier told Reuters.

Beltone said it would take one per cent of EFG Hermes, but did not say who the other investors were. The sources said they included Sawiris.

Egypt’s Financial Supervisory Authority said in a statement an offer had been submitted to buy 20 per cent of EFG Hermes’s shares. It said an entity called New Egypt Investment Fund would buy 17.82 per cent, while Beltone planned to acquire 1.09 per cent and Beltone Capital Holding would acquire another 1.09 per cent.

It did not say who was behind New Egypt Investment Fund but the two sources who confirmed Sawiris’s involvement in the deal told Reuters that the fund is affiliated with him.

Sawiris declined comment and a source at EFG Hermes told Reuters on condition of anonymity the firm had not received details of any offer.

“No one spoke with us at Hermes to make an offer to buy … But we welcome any investor who has solvency such as Sawiris and wants to invest in Hermes with around $250 million,” the source said.

SHARES SUSPENDED

One source familiar with the matter said the 20 per cent stake was not a final figure. “The numbers are still not confirmed but it is around 20 per cent,” the source said, adding: “EFG always separates ownership from management so it will not have an effect on the way the company is run.”

The sources said that the transaction would not involve the issuance of new shares.

Shares in EFG Hermes had jumped 6.8 per cent on Wednesday before they were suspended at 13.52 pounds pending a statement by the market regulator, the Egyptian Exchange said.

The bourse said on Thursday it would cancel all of Wednesday’s transactions in EFG Hermes shares, which were up seven per cent by 0900 GMT on Thursday.

The government of Dubai owned 11 per cent of EFG Hermes as of the end of March, making it the biggest shareholder, according to Thomson Reuters data. EFG has about 67 per cent of its shares free floating, or readily tradeable.

EFG Hermes had in 2012 agreed on a deal with Qatar’s QInvest to spin off part of its assets to create an investment bank with operations spanning the Middle East, Africa and Turkey. QInvest would have pumped in $250 million for a 60 per cent stake.

But the deal fell through last year after failing to win regulatory approval in Egypt. EFG Hermes, whose operations span the United Arab Emirates, Saudi Arabia, Qatar, Jordan, Oman, Kuwait and Lebanon as well as hits home market, said it would instead cut costs and sell off non-core assets.

“Given their exposure to the whole MENA region, it looks like quite an attractive bet as an acquisition target. If someone wants to get himself exposed in the investment banking sector in the whole region, why not?” said Allen Sandeep, head of research at NAEEM Brokerage.

“Let’s wait and watch if this goes any further but a 20 per cent stake, you can still call it a strategic stake,” Sandeep added.

Deals in Egypt’s financial sector have dried up over the past three years, since a popular uprising ousted President Hosni Mubarak in 2011, sending the country into turmoil and deterring foreign investors.

But some analysts expect a renewed flow of investments after former army chief Abdel Fattah al-Sisi won more than 90 per cent of the vote in presidential elections last week.

In May Egypt’s Arabian Cement Co listed on Cairo’s bourse and was 18.5 times over-subscribed, making it the first major listing in Egypt since the uprising.