Orascom Telecom Media and Technology Holding’s (OTMT) investment arm, Beltone of CI Capital’s acquisition deal, will undergo an exceptional examination, which is separate from the examination of Orascom’s acquisition of Beltone, chairperson of the Egyptian Financial Supervisory Authority (EFSA) Sherif Samy said.
In response, OTMT said in a Saturday statement that the acquisition of Beltone was completed after getting approval from the EFSA, “which has not requested any additional information at the time of acquisition.”
The EFSA delayed the approval of CI Capital’s acquisition offer because OTMT committed a violation through its division process in 2012, therefore Beltone’s 2015 deal was supposed to be delayed for the same reason.
When the controlling shareholder of Beltone, Sawiris, was dividing Orascom Telecom to Orascom Telecom and Global Telecom in 2012, he provided the EFSA with a pledge proving that Wids Investment Company owns 51% of Orascom Telecom. However, the ownership was then transferred to another company, which violated the pledges provided to EFSA.
The EFSA did not discover this violation through the documents OTMT provided in order to obtain approval for the acquisition of Beltone, therefore the authority is working on a more accurate examination of the acquisition of CI Capital.
Beltone’s acquisition deal does not require as thorough an examination as the CI Capital deal, because the deal result will be an integration of two investment banks that acquire 25% of the trading market transactions. The authority needs to perform an exceptional and accurate examination to make sure the acquisitions process will be fully safe and correct, Samy said.
Samy confirmed that the company has two options by which the violation can be settled. Either the main shareholder must request settlement and pay a fine determined by the authority, according to EFSA protocol, or the shareholder can reject the authority’s decision and take the case to court.
The examination of all acquisitions should be unified and standardised, a source related to the deal said, asserting that the EFSA’s discovery of the violation at a later date should be void as the authority itself should be held accountable for an investigation that is found lacking.
Beltone is not small in size for an investment bank and was supposed to be subjected to a similar examination as that of the CI Capital acquisition, the source said.
The source added that the EFSA was constantly asking for further documentation about previous Board of Directors’ meetings and data about the company’s history. The authority demanded more than was required from the company through its acquisition of Beltone, which the source found surprising.
The second reason for EFSA’s delay in approving the acquisition is that Sawiris sold CI Capital to the Commercial International Bank (CIB) at a price of EGP 28.75 per share in 2008, but the acquisition offer did not include reward shares.
Forty employees in the CI Capital company, who have owned reward shares since 2008, have filed a lawsuit. They resorted to suing the CIB to compel the bank to buy their share. A ruling from the Cairo Economic Court obliged the bank to purchase their shares; however, the CIB appealed against the Court of Cassation ruling.
Samy said it is the authority’s duty to ensure the safety of acquisition deals and to resolve matters related to shareholders before issuing its approval.
Samy previously told Daily News Egypt, at the beginning of the lawsuit deal, that it is an internal matter for Beltone, and its dimensions will be realised through the due diligence on the investment bank CI Capital.
Naguib Sawiris said, in an article in Al-Akhbar newspaper on 27 March, that national security is the reason behind the deal being rejected.
Beltone deputy managing director for Brokerage Sector, Ahmed Salim, said both sides wish to complete the deal and to settle the points mentioned by the EFSA, therefore the acquisition offer was extended by 14 days to 28 April
Salim said Beltone is developing a strategy to expand depending on several alternatives in the investment banking filed, as well as the possibility of a breakthrough in the consumer finance sector.
OTMT targets to acquire Beltone and 100% of CI Capital with EGP 924m, in an attempt to construct a large investment bank that can compete regionally.