EFG-Hermes rejects $1.1bn offer in favour of venture with QInvest

  EFG-Hermes Holding, the biggest publicly traded Arab investment bank, rejected a $1.1bn bid from an Egyptian company backed by billionaire Naguib Sawiris in favour of a venture with Qatar’s QInvest.
Planet IB Ltd’s 13.5 Egyptian pounds-a-share offer lacked details on the “financing resources” as well as information about the investors, Cairo-based EFG-Hermes said yesterday. The bid is 23% more than the stock’s May 31 close.
EFG-Hermes, which operates in countries including Egypt, Saudi Arabia and the UAE, would extend its reach to Turkey and as far as Southeast Asia through the venture. Planet IB chief executive officer Ahmed El Houssieny may pursue a hostile takeover of EFG if management refuses to allow it to conduct due diligence.
“I will not shy away from Egypt’s first hostile takeover,” El Houssieny said on Saturday in a statement to Bloomberg. “I have done Egypt’s first corporate bond issuance, Egypt’s first leveraged buyout, Egypt’s first securitisation transaction.”
EFG-Hermes shareholders voted on Saturday in favor of an agreement that will give QInvest, a unit of Qatar Islamic Bank, 60% of the venture, which will exclude EFG-Hermes’s private-equity business and its stake in Lebanese commercial bank Credit Libanais. Investors will receive a one-time cash dividend of about 4 pounds a share, the bank said yesterday.
EFG-Hermes will have the right to sell its 40% stake to QInvest in the 12 months to 36 months from signing of the transaction at a price of 1bn pounds ($165mn), it said May 8. QInvest also retains the right to buy its partner’s stake in the same period at the higher price of $165mn or the “fair market value at the time of the exercise, subject to a cap.”
QInvest has said it will invest $250mn in the venture. The units being transferred into the venture with QInvest were valued at 700.5mn pounds by accounting firm Grant Thornton, EFG-Hermes said May 30.
“As shareholders we are getting a great valuation of the investment banking franchise,” said Rami Sidani, the Dubai-based head of Middle East and North Africa investments at Schroder Investment Management, which owns EFG-Hermes shares. The agreement on the remaining 40% stake in the joint venture will help shareholders “capture part of the upside,” he said, should investment banking activities in Egypt rebound from a slump that followed last year’s uprising.
EFG-Hermes said Planet IB’s offer didn’t provide a commitment that a bid will be presented after due diligence. Shareholders present at Saturday’s vote included Dubai Financial Group and the Abu Dhabi Investment Authority, the emirate’s sovereign wealth fund, it said.
Planet IB is “offering a hefty premium over the current market prices, which again as shareholders we will be willing to look at,” Sidani said. “However, unfortunately the deal remains quite ambiguous and we still don’t have full certainty whether the funds are available for a potential bid.”
Planet IB said on May 31 it secured $650mn in debt and “substantial equity commitments” from domestic, regional and international investors, including a member of the ruling family of Sharjah. El Houssieny, former managing director at Cairo-based private-equity firm Citadel Capital SAE, said the offer hinged on EFG-Hermes’s management allowing his company to conduct due diligence.
“If EFG-Hermes is serious about entertaining a tender offer from Planet IB, it must immediately postpone the execution of the alternative transaction,” Planet IB said in Saturday’s statement.
The agreement with QInvest requires regulatory approval. Ashraf El Sharkawy, chairman of the Egyptian Financial Supervisory Authority, wasn’t available for comment when contacted by Bloomberg News in Cairo yesterday.
EFG-Hermes’ co-chief executive officers were referred to trial in Egypt May 30, charged with illicit gains related to the 2007 sale of El Watany Bank of Egypt. EFG-Hermes has denied the charges, which centred on the lack of disclosure of trading activities and involved seven others including Alaa and Gamal Mubarak, the sons of former president Hosni Mubarak.