EFG-Hermes takeover by QInvest mired in delays

The takeover would include EFG’s main investment banking, asset management and brokerage businesses, and exclude its private equity business and Credit Libanais SAL unit. QInvest EFG-Hermes plan to create an investment bank with operations in the Middle East, Africa and Turkey, as well as southern and southeastern Asia.

Bloomberg/Cairo

The takeover of EFG-Hermes Holding, Egypt’s biggest investment bank, by Qatar’s QInvest is mired in delays almost a year after the transaction was agreed.

The deal is set to expire on May 4 unless it receives a so-called no objection from Egypt’s regulator on the transfer of its assets to Qatar, Hanzada Nessim, investor-relations manager at Cairo-based EFG-Hermes, said on Monday by telephone. The regulator hasn’t given a date for a decision.

QInvest, a unit of Qatar Islamic Bank, and EFG-Hermes plan to create an investment bank with operations in the Middle East, Africa and Turkey, as well as southern and southeastern Asia. The takeover would include EFG’s main investment banking, asset management and brokerage businesses, and exclude its private equity business and Credit Libanais SAL unit.

EFG-Hermes’s co-chief executives, Yasser al-Mallawany and Hassan Heikal, are also defendants alongside former Egyptian president Hosni Mubarak’s two sons, Alaa and Gamal Mubarak, and five others on charges of unlawful gains related to the 2007 sale of El Watany Bank of Egypt. The trial began in July 2012.

A QInvest spokesman declined to comment.

“I don’t think the deal will go through before the lawsuit is finalised,” Hany Genena, head of research at Cairo-based Pharos Securities Brokerage, said yesterday by telephone. “It is not clear when the lawsuit will end.”

The terms of the deal include a four Egyptian pound per share dividend once it is completed.

EFG-Hermes fell as much as 2.7% and traded at 10.05 pounds as of 2.19pm, after declining 1.3% on Monday. The stock has declined 8.6% this year, compared with a 5.7% drop for the benchmark EGX 30 Index.

QInvest has cut jobs at its brokerage and asset management divisions ahead of the transaction, two people familiar with the matter said in October. Under the terms of the proposed deal, QInvest will take 60% of the new entity and EFG-Hermes the remainder, with QInvest having the option to buy EFG- Hermes’s stake in one to three years after completion.

Still, Beltone Financial, which has a buy rating on EFG-Hermes, said in an emailed note to investors yesterday that both parties remain committed to the deal even amid delays, reiterating its positive outlook on the shares. Beltone has a price estimate of 15.58 Egyptian pounds on EFG, implying a 52% gain from Monday’s closing price of 10.28 pounds. The investment bank would be the largest in “the Arab World, Africa, Turkey, South and South East Asia,” EFG-Hermes said in April.