The UAE is seeking to buy the largest investment bank in Egypt Investment or acquisition?

EFG Hermes announced the transformation into a comprehensive bank at the end of last year, after completing the acquisition of 76% of the Arab Investment Bank by entering into an alliance with the Sovereign Fund of Egypt.

Cairo-  The news of the offer submitted by First Abu Dhabi Bank (the largest bank in the United Arab Emirates) to acquire the financial group Hermes Holding Company (the largest investment bank in Egypt) continues to raise controversy in the Egyptian economic circles between supporters and opponents of the possible deal, which was announced last week.

Hermes revealed in a statement to the Egyptian Stock Exchange that it had received a non-binding initial purchase offer from First Abu Dhabi Bank for a possible cash acquisition of a majority stake of no less than 51% of the company’s issued capital shares, at an estimated purchase price of 19 Egyptian pounds per share, with a value of It is estimated at 18.5 billion Egyptian pounds ($1.18 billion).

The statement added that the completion of the deal and setting the final price is conditional on conducting the due diligence process on the company and obtaining the required regulatory approvals for a compulsory purchase offer on all of the company’s shares in accordance with Law No. 95 of 1992.

If the deal is completed, the UAE bank will become the owner of the controlling stake in the strongest and largest investment bank in Egypt, and become the main reference in the investment banking services sector in the region. This will be the second major deal for First Abu Dhabi Bank, which acquired Bank Audi Egypt (affiliated with Audi Group). Lebanese banking) last year, thus becoming one of the largest foreign banks in Egypt in terms of assets exceeding 130 billion pounds ($8.5 billion).

In a new disclosure to the Egyptian Stock Exchange, the Board of Directors of EFG Hermes Holding decided in its meeting last Sunday to start appointing an international financial advisor and an Egyptian legal advisor to provide financial and legal advice on this potential deal.

EFG Hermes announced the transformation into a comprehensive bank at the end of last year, after completing the acquisition of 76% of the Arab Investment Bank by entering into an alliance with the "Egypt's Sovereign Fund" by increasing the bank's capital to 5 billion pounds, and its share amounted to 51% and the fund's share. 25%. (A dollar equals 15.75 pounds).

Indications of Emirati Expansion

The potential deal raised questions about the implications of the Emirati expansion in acquisitions of several sectors in Egypt, including the banking and financial sector, and is it an interest in investment opportunities in the Egyptian market or a desire to dominate certain sectors? Why is Egypt losing one of the region's leading institutions in the field of financial services with diversified products serving emerging markets to another country?

According to observers and analysts, the great importance of "Hermes" does not lie in the size of its assets or capital only; Rather, it is in the size of the assets, investment funds, financial portfolios and offerings it manages, and its 35 years of experience in the Middle East and North Africa region; Which makes it a pioneer in its field and the most successful company in its activity.

How big is Hermes?

The financial group achieved strong profits during the first nine months of 2021, as its net profits rose by 26% on an annual basis to 1.1 billion pounds, and its revenues increased by 8% on an annual basis to reach 4 billion pounds.

EFG Hermes Holding was established in 1984 and has been listed on the Egyptian Stock Exchange since 1999. The authorized capital of the company is 6 billion pounds, the source is about 4.8 billion pounds, and the number of its shares is 973 million and 70,671 shares. The company’s ownership structure is distributed among a number of institutions with less than 50 % and the remaining share is represented in freely traded shares.

The company is present in 13 countries across 4 continents around the world, and its services cover 75 different markets in several countries. It is one of the largest and most important asset management companies in Egypt, providing promotion services and underwriting securities on the regional scene.

And Hermes is the largest stockbroking company in the Middle East and North African markets, as well as emerging and frontier markets around the world. The company occupies the first place in the market in terms of the number of investment funds that it manages of various types and manages many investment portfolios.

Waste not investment

Professor of Investment and Finance, Dr. Wael Al-Nahhas, said that the news of the offer was in favor of the Egyptian Stock Exchange, but against the company’s interest, saying, “In the beginning, the offered offer is less than the real share price, but it comes at a time when positive news has been absent from the Egyptian market, and it may be aimed at absorbing the market collapse or Supporting the bank’s investment portfolios and funds, especially since the offer is not binding and requires procedures that extend for several months.

A financial market expert and one of those opposed to completing the deal expected in statements to Al-Jazeera Net that it would fail, calling not to waste what he called the "icon" of investment companies in Egypt and the region, and it is difficult to compensate; Because the importance of the company is not in the capital but in the human minds that own it, this is not an investment but a waste.”

He pointed out that in 2012 and 2014, two previous attempts to acquire the company failed, the first by an Arab country, and the second by businessman Naguib Sawiris to buy 20% of the company's shares. He did not rule out that the latter was behind the First Abu Dhabi Bank's offer to acquire the The company is again within the framework of the strategic partnership that links it with the financial and business centers in the Emirates,” according to a statement by Dr. Wael Al-Nahhas.

Egyptian businessman Naguib Sawiris , head of Orascom Investment Holding Company, welcomed the purchase offer submitted by First Abu Dhabi Bank to acquire EFG Hermes. "The deal will support the Egyptian pound, which is, on the whole, good news."

The head of the research sector at Al-Ahly Pharos Securities, Radwa Al-Swaify, confirmed that "the offer is positive news." at low levels.

Monopolizing investment decisions in the Egyptian Stock Exchange

While the technical expert and financial analyst in the Egyptian stock market, Safwat Abdel Naim, said that the offer submitted by First Abu Dhabi Bank completely ignored the results of the current year for Hermes, which are estimated at 1.3 billion Egyptian pounds.

In a post on his Facebook page, he called for "accelerating the disclosure of the risks of exporting this intertwined commodity linked to the company's investments by Hermes in all sectors, the latest of which was the investment partnership with the Sovereign Fund of Egypt to acquire the Arab Egyptian Investment Bank."

Abdel Dayem added that this is in contrast to the company’s control of the largest volume of capital in the Egyptian Stock Exchange through its management of many investment funds, especially in national and investment banks, which is also the investment arm of the largest foreign investment funds invested in Egypt, which enables it to increase opportunities to monopolize investment decisions. on the Egyptian Stock Exchange.