By Mohammad Ayyad
The offer to purchase 20% of shares in EFG-Hermes from investors is still being studied, according to Sherif Samy, chairman of the Egyptian Financial Supervisory Authority (EFSA).
Commenting on the offer, Samy said no final decision has yet been reached, and further clarification may be sought from those providing the offer, among them businessman Naguib Sawiris.
“I cannot give a specific timeframe for the Authority’s decision regarding the purchase, but we are still studying the issue,” said Samy, “The body previously refused an offer to purchase Qatar’s QInvest for a share in Hermes a year after the offer was made.”
Egyptian company Beltone said in a statement to the bourse last Thursday that its board of directors approved a voluntary offer to EFSA to acquire 20% of Hermes’ shares. The purchase from investors will be in exchange for EGP 1.835bn at a price of EGP 16 per share.
EFSA refused to comment on the extent to which the market impacts the deal. It said such news emphasises that there are quality products present in the bourse and that investors are optimistic about the future of the market. However, Samy said that those making the offer must publicly announce the purchase after its approval in two newspapers and two dailies.
Shares in Hermes increased on the Egyptian Stock Exchange by 6.8%, arriving at a value of EGP 14.06 before trading was halted after media rumours claimed a group of investors intended to buy a stake in the group.
Responding to rumours the deal may have political overtones, the head of the Supervisory “will not interfere with peoples’ intentions in order to understand what they think about.” It has been claimed the deal may be in support of the stock market which collapsed under pressure from a capital gains tax before the inauguration of the new president.
Last week the government agreed to impose a tax on capital gains in the bourse as well as cash distributions. The move cost the market heavy losses amidst sales operations conducted by individual entrepreneurs.
Beltone is one of the largest financial institutions in Egypt, boasting a market value of EGP 216.6 million. With approximately 17 subsidiary companies, it specialises in investment activities, asset and securities management, and underwriting coverage. Hermes’ market value stands at EGP 8.063 bn.
Hermes is the largest investment bank in the Middle East and owns many subsidiary companies as well as a share in Credit Libanais. It operates in several countries across the region including in Egypt, the GCC, Lebanon and Jordan.
Naguib Sawiris, along with Planet Investment Group, hoped to acquire Hermes in 2012, when shares were worth EGP9, but the deal was never completed.
“Sawiris left Mobinil following the restructuring of Orascom, which pushed him to work to acquire a share of Hermes as a financial arm that would help him in implementing acquisition or bonds in his new, inactive companies or those already operating,” said Mohamed Farid, Chairman of Dacod Financial Advisors.
Farid, previously Deputy to the Chairman of the bourse, rejected the link between current conversations for investors to acquire a share of Hermes, and the consolidation and strengthening of bourse indexes. He said the news of the acquisition has “a weak and very short impact,” that will disappear after a single session.
“Acquisition activities in Egypt are weak and do not have a large impact on the market, as over the past three years we witnessed only two acquisition deals involving Electrolux and Olympic Group 2011 and then the Qatar National Bank deal,” said Farid.
He added that the FSA is considering the solvency of those making the offer from financial and technical standpoints. The authority will be taking into account whether they have experience in the field of the company to be acquired. He emphasized that the Supervisory rejected an offer to purchase QInvest, due to a lack of financial and technical experience in managing Hermes.
“The FSA will explore the solvency and strength of the ownership structure of those offering the purchase individually, as well as the extent of the company’s independence,” Farid added, “An evaluation has been conducted in accordance with standards followed.”
“Interest from Egyptian institutions” in the Hermes Financial Group ““is positive” and will remain a question for those offering the purchase, namely, Sawiris and Beltone “for their goal of owning 20%” according to Hisham Tawfiq, Chairman of Arabiya Online and member of the board of directors of the Bourse.