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Sun 3 Jun 2012 05:17 PM

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EFG-Hermes rejects US$1.1bn offer in favour of Qatar venture

Arab investment bank snubs billionare-backed deal, instead chooses QInvest

EFG-Hermes rejects US$1.1bn offer in favour of Qatar venture
(Image for illustrative purposes only)

EFG-Hermes Holding, the biggest publicly traded Arab investment bank, rejected a US$1.1bn bid from an Egyptian company backed by billionaire Naguib Sawiris in favor of a venture with Qatar’s QInvest.

Planet IB's EGP13.5-a-share offer lacked details on the “financing resources” as well as information about the investors, Cairo-based EFG-Hermes said today.

The bid is 23 percent more than the stock’s May 31 close. The shares rose 1.3 percent to EGP11.11 at 2:26 pm in Cairo, while the benchmark EGX 30 Index was down 1.3 percent.

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 CEO 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 yesterday 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 yesterday in favor of an agreement that will give QInvest, a unit of Qatar Islamic Bank, 60 percent 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 today.

EFG-Hermes will have the right to sell its 40 percent stake to QInvest in the 12 months to 36 months from signing of the transaction at a price of EGP1bn (US$165m), it said May 8. QInvest also retains the right to buy its partner’s stake in the same period at the higher price of US$165m or the “fair market value at the time of the exercise, subject to a cap.”

QInvest has said it will invest US$250m in the venture. The units being transferred into the venture with QInvest were valued at EGP700.5m 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 percent 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 yesterday’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 May 31 it secured US$650m in debt and “substantial equity commitments” from domestic, regional and international investors, including a member of the ruling family of Sharjah in the UAE. 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 yesterday’s statement.

The agreement with QInvest requires regulatory approval. Ashraf El Sharkawy, chairman of the Egyptian Financial Supervisory Authority, was not available for comment when contacted by Bloomberg News in Cairo today.

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 centered on the lack of disclosure of trading activities and involved seven others including Alaa and Gamal Mubarak, the sons of former president Hosni Mubarak.

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