Move makes UAE company single largest shareholder in bank
CAIRO: Thanks to an offer made by UAE-based Abraaj Capital Limited, a private equity firm, to buy a 25 percent in Egyptian investment bank EFG Hermes, Egyptian share prices witnessed a boost earlier this week.
According to an EFG Hermes statement, EFG’s board met in Cairo on July 29 and accepted Abraaj’s offer to buy more than 97 million new EFG shares at LE 30 pounds per share in a deal valued at roughly $505 million (LE 2.9 billion). The deal, which will be made through a capital increase and is subject to regulatory approval by EFG-Hermes’s shareholders and board members, will be made through a wholly-owned subsidiary that will be called Abraaj Egypt Ltd.
Should the approval go through, Abraaj would become the single largest shareholder in the Egyptian investment bank, who in turn is the largest shareholder in Bank Audi of Lebanon.
According to EFG chief executive, Hassan Heikal, this move is in line with EFG-Hermes stated strategy to aggressively expand its regional presence across all business lines, thereby creating a regional financial services powerhouse.
Abraaj Capital, based in Dubai, is a prominent private equity firm with a presence in the Middle East, North Africa and South Asia region. It has $1.5 billion (LE 8.6 billion) of assets under management.
This is a strategic and long term investment for Abraaj, Arif Naqvi, Abraaj Capital s vice-chairman and chief executive, said to Gulf News.
News of the offering served to encourage traders to invest in the Egyptian stock market after their hesitation to trade over the long weekend that marked the 54th anniversary of the overthrow of Egypt’s monarchy, and on Sunday, the first anniversary of the bombing in Sharm El-Sheikh that killed 67 people.
According to experts, the long weekend was a slow one for traders, as previous attacks targeting tourists in Sinai have taken place over national holidays, thus making traders uneasy.
“There had been a lot of cautiousness for fear of any terror attack that might happen, said Mohammed Radwan of Delta Securities to Gulf News. “News of the Israeli-Lebanon crisis is already discounted in the market.
However, once the weekend passed without any unusual occurrences or violent attacks, it was back to trading as usual. Coupled with the news of an offering, stock prices jumped.
Shares in EFG-Hermes, the most heavily traded stock by turnover, jumped 23.8 percent to end at LE 34.50.
The benchmark Hermes index ended 2.9 percent higher at 45,412.38 points, while the broader CIBC index gained 1.7 percent to close at 199.94 points. The widely watched CASE 30 index rose 3.8 percent to 5,132.16 points.
Shares in Ezz Steel Rebars and Arabia Cotton Ginning, both popular among retail investors, also rose. Ezz Steel ended the day 11.3 percent higher at LE 52.05, while Arab Cotton Ginning was up 15.8 percent ending at LE 11.85.
This is not the first time that EFG has pushed the Egyptian stock market up. In May of this year, shares in EFG pushed up the market merely two days after the investment bank was granted the license to set up operations in Saudi Arabia, according to Reuters.
News of the license found the Hermes index rising from 1.8 percent to 52,708.86 points. The Case 30 index also went up 2.4 percent to 6,107.29 points and the CIBC index rose 1.4 per cent to 218.77 points.
At the end of 2005, EFG Hermes revenues reached a total of LE 831.24 million. Their net profit margin reached 47.12 percent, operating margin was 57.16 percent, return on average assets was 16.07 percent and return on average equity reached 18.95 percent.
Once EFG begins operations in Saudi Arabia (which is expected to occur before the year is out), these numbers should rise sharply.
“The Saudi market is, by far, the largest financial market in the region, Nermeen Ameen, head of investor relations at EFG Hermes previously said to The Daily Star Egypt. “We wouldn’t have held water in the regional market without Saudi, she added.
According to Ameen, the Saudi market makes a turnover of approximately $8-10 billion (LE 45-60 billion) a day, compared to the $300 million (LE 1.7 billion) in turnover made in Egypt and most of the EU on an average day.
“So it’s a huge market. We are talking about billions of dollars in a single day, Ameen said.