Commercial Bank of Kuwait (CBK) said it could bid up to four times book value for Al-Watany Bank of Egypt in a contest with Kuwaiti and Greek rivals, boosting the Egyptian lender's stock.
Based on half-year book value, Commercial Bank would be paying as much as $568 million for a majority stake, or a 21 % premium to Monday's closing price to enter the most populous Arab country.
The exact book value would depend on the outcome of due diligence, Commercial Bank Chairman Abdul-Majeed al-Shatti told Reuters on Tuesday, clarifying earlier remarks that drove Watany's stock to a 2007 high.
Commercial Bank, National Bank of Kuwait and Greece's EFG Eurobank were given six weeks in June to conduct due diligence on Watany, the latest Egyptian lender to go on sale as part of government plans to encourage foreign investment and create larger banks. All three want to bid for majority stakes.
Commercial Bank, Kuwait's fourth-largest lender by market value, is considering bidding for 70 % of Watany with its partner Noor Financial Investment Co., Shatti said. Noor wanted 10 % of the Egyptian lender, he said.
"The final bid is next week...We are contemplating about four times book," Shatti said earlier Tuesday, without elaborating.
He later clarified the remarks, saying the four times book value was the maximum Commercial Bank would pay. "I don't know the exact book value. That would depend on due diligence," he said.
Commercial Bank's offer could be lower if the book value was adjusted during due diligence for non-performing loans which made up 17 % of Watany's loan book on Dec. 31, said Radwa el-Swaify, banking analyst at Beltone Financial in Cairo.
"It's about mid-range among Egyptian banks with regard to non-performing loans," she said.
Based on Watany's book value at the end of the first half, the 70 % stake could be worth 3.2 billion Egyptian pounds ($567.6 million), or 63.2 pounds per share.
Watany's stock rose more than 4 % after Shatti's remarks and ended 3.9 % higher at 53.98 pounds. Egypt's benchmark index rose for the first time in three days.
"The bid is high but you have to take into account that the only way to get into the market is to acquire a bank as new licenses are not being granted," said Hatem Alaa, banking analyst at HC Brokerage in Cairo.
Italy's Sanpaolo and Abu Dhabi Islamic Bank are among foreign lenders that have bought Egyptian banks to gain access to an economy that grew 7 % in 2005/2006.
EFG Eurobank is waiting for a call from Egyptian officials to submit its bid, a source at the bank, Greece's second-biggest by assets, told Reuters in Athens. "We are talking about a majority stake," the source said.
EFG Eurobank said last week it planned to raise 1.2 billion euros ($1.66 billion) in a rights issue to fund expansion and acquisitions in southeast Europe and the eastern Mediterranean.
National Bank of Kuwait plans to bid for a majority stake, a spokesman for Kuwait's largest lender by market value said.
Like other Gulf banks benefiting from oil prices that have tripled since 2002, Kuwaiti lenders are expanding abroad as competition intensifies at home, with foreign players such as HSBC Holdings and BNP Paribas SA having entered the market.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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