Egypt’s sovereign fund, EFG Hermes partner to acquire control of Arab Investment Bank

The Sovereign Fund of Egypt (TSFE) and EFG Hermes Holding have inked agreements to acquire 76 per cent of the capital of Arab Investment Bank (AIB).

The acquisition will be structured as a capital increase that will scale the paid-in capital of AIB to EGP5bn ($320m), making it compliant with the regulatory requirements of the Egyptian banking law, a statement said.

EFG Hermes will subscribe to 423 million newly issued shares of the bank at a price per share of EGP6.03 and a total value of EGP2.55bn. Meanwhile, TSFE will subscribe to 207 million newly issued shares of AIB at the same price per share, for a total value of EGP1.25bn. Following the execution of the capital increase, EFG Hermes will become the largest shareholder of AIB with a stake of 51 per cent, followed by TSFE at 25 per cent.

The National Investment Bank, which is currently AIB’s majority shareholder, will hold the remaining 24 per cent after purchasing stakes currently held by minority shareholders (prior to the execution of the capital increase). The transaction was approved by the Egyptian Cabinet on May 19, but is subject to a number of conditions precedent, including the final approval of the Central Bank of Egypt.

Dr. Hala El Said, minister of Planning and Economic Development and chairperson of TSFE, said: “Completing the AIB partnership transaction underscores TSFE’s pivotal role in unlocking and maximising the value of state-owned assets. This transaction complements Egypt Vision 2030’s third objective of achieving knowledge-based economic growth and digital transformation; increasing the resilience and competitiveness of the economy; increasing employment rates; improving the business environment; and realising financial inclusion.”

“AIB’s financial indicators will witness a substantial improvement, as will its competitiveness within the market. It will be better poised to comply with the Central Bank of Egypt’s regulatory requirements, drawing on the technical expertise available in TSFE and EFG Hermes, AIB’s new partners.

“The transaction’s success is a result of the cooperation protocols TSFE signed with different state bodies including the National Investment Bank, benefitting from its large portfolio. It reflects the close collaboration between different state bodies, in coordination with the cabinet, working towards attracting private investments to government projects.”

Mona Zulficar, chairperson of EFG Hermes Holding, added: “The signing of this landmark transaction has helped create a partnership between TSFE and EFG Hermes, the leading financial services corporation in frontier emerging markets, as we work together to unlock the potential of the Bank and help it play an increasingly active role in the Egyptian Government’s drive for financial inclusion and digital transformation in the coming years.”

The parties will begin working on the fulfillment of the conditions precedent immediately, with the transaction expected to close in the third quarter of 2021.