The year 2015 will be known as the year of acquisitions in the investment banking sector, since Pharos and Beltone witnessed radical changes that will soon extend to reach CI Capital, the investment arm of the Commercial International Bank (CIB).
A series of conflicts arose between Beltone’s founders Alaa Saba and Aly El-Tahry at the end of 2011 and the beginning of 2012.
In an attempt by Aly El-Tahry to force Saba to sell his stake in Beltone, he sold his 10% share to El-Arabia for Investment and Development, which agreed with Saba to buy his 20% stake on the condition of appointing El-Tahry as Chairman or Managing Director of Beltone.
However, due to pressure from workers who have stakes in the company and the support of shareholder Samih Sawiris, Saba did not sell his stakes. He attributed this to El-Arabia’s letter to the Egyptian Stock Exchange (EGX), citing the possibility of not closing the deal over some technical issues with Beltone.
Following this step, El-Arabia sold its Beltone stakes through an open market offering.
The second phase of the conflict began in 2012 with the EFG Hermes-Sawiris conflict. The Qatari QInvest offered to acquire EFG Hermes by establishing a new entity under the name EFG Hermes-Qatar. The proposal provided the Qatari company with 60% of the shares and a payment of $250m for Hermes. Sawiris then stepped in for the competition.
This time, Sawiris entered the arena under the cloak of Planet Investment Banking, which was established in partnership with former managing director of Qalaa Holdings Ahmed El-Husseini and former chairman of Bank of Alexandria Mahmoud Abdel Latif.
However, this time, Hermes’ acquisition failed after accusations were exchanged between Planet IB and Hermes of violating laws. This led the General Assembly of EFG Hermes to reject the offer letter from Planet IB, and at the same time they agreed in principle to proceed with the QInvest deal.
However, the Egyptian Financial Supervisory Authority (EFSA) refused to complete the acquisition.
EFSA justified its refusal by saying that QInvest had little experience and lacked the legal requirements to own a subsidiary of EFG Hermes, which is one of the largest investment banking companies in Egypt.
A year later, Sawiris made another move to acquire Hermes, specifically at the end of 2013 and early 2014. Sawiris processed an acquisition offer at a price of EGP 9.5 per share. Deutsche Bank was the independent financial advisor for the offer.
Sawiris’ offer was only one pound more than the average market price for EFG Hermes’ share. EFG Hermes’ Board of Directors decided to buy EGP 1bn worth of treasury shares. This raised the share price, causing to hit the roof at EGP 11.6. Sawiris’ bid failed before he presented it officially.
Having learned from experience, Sawiris tried to avoid making the same mistake when he made his third acquisition offer.
He startled the Board of Directors of EFG Hermes in June 2014 with an offer to buy 20% of the group shares through his company New Egypt, in cooperation with Beltone.
EFG Hermes’ shareholders offered to sell 54.4m shares to the Sawiris-Beltone alliance at EGP 16 per share. Sawiris rejected this offer, as it represented only 48% of his acquisition target. The attempt once again failed.
After a series of failed acquisitions attempts in the investment banking sector over three years, Pharos finally announced at end of March 2015 the Taymour family’s acquisition of over 80% of the company in exchange for of keeping the remainder 20% for Al-Rajhi in an EGP 40m deal.
Two months ago, the Orascom Telecom-AC alliance successfully acquired Beltone for EGP 650m. The business community considered the move to be the beginning of Naguib Sawiris’ journey in the financial services sector.
The market now awaits the fate of Orascom Telecom’s offer to acquire CIB’s CI Capital. The deal is expected to be worth between EGP 900m and EGP 950m.