x Abu Dhabi, UAETuesday 23 January 2018

UAE firms hold key to takeover of EFG-Hermes

Two UAE Government investment funds have emerged as key backers of a bid by Qatar's QInvest to create a joint venture with EFG Hermes.

Two UAE investment companies have emerged as key players in a tie-up between Qatar's QInvest and EFG-Hermes. (Dana Smillie for The National)
Two UAE investment companies have emerged as key players in a tie-up between Qatar's QInvest and EFG-Hermes. (Dana Smillie for The National)

Two UAE investment companies have emerged as key players in a tie-up between Qatar's QInvest and EFG-Hermes.

Their role was revealed as a rival bid worth more than US$1 billion (Dh3.67bn) from a consortium of Arab investors sought to block the deal and prevent a break-up of one of the Middle East's biggest investment banks.

EFG-Hermes claimed in a statement that Dubai Financial Group and the Abu Dhabi Investment Authority both voted at the bank's extraordinary general meeting in favour of a proposal tabled by QInvest to create a joint venture called EFG-Hermes Qatar.

Both UAE funds declined to comment on the matter.

Together, the two own about a quarter of EFG-Hermes shares, with Dubai Financial Group the largest single shareholder.

But a group of Arab investors has sought to derail the offer by forwarding an ultimatum to EFG-Hermes seeking to block the transaction.

Planet Investment Banking said it was prepared to pay a minimum of 13.5 Egyptian pounds per share for the entirety of the company's shares.

"If EFG-Hermes is serious about entertaining a tender offer from Planet IB, it must immediately postpone the execution of the alternative transaction," the company said.

"Planet IB is prepared to extend a public tender offer immediately after the completion of customary due diligence. Planet IB therefore calls upon the board of directors of EFG-Hermes Holding to immediately open its books to due diligence."

Planet IB is a consortium including the telecommunications tycoon Naguib Sawiris and a member of Sharjah's ruling family.

Their bid, which represents a 22.6 per cent premium on the shares' closing price yesterday, values the investment bank at $1.06bn.

EFG-Hermes' Cairo-listed shares rose 0.3 per cent to 11.01 pounds in trading yesterday.

"The market was disappointed by the deal with QInvest, and the counter-offer with Planet IB has emerged as a hope for retail investors," said Waleed El Bendary, the head of buy-side research at Rasmala Egypt Asset Management.

"The holders of the stock right now are hoping for a tender offer above 13.5 Egyptian pounds [per share] ... but I believe they have to know more about the financial commitments of Planet IB."

QInvest is seeking to create a joint venture with EFG-Hermes and inject $250 million.

The proposed company, EFG-Hermes Qatar, will be 60 per cent controlled by QInvest, with options to acquire the remaining 40 per cent stake for $165m, which can be exercised a year after their "strategic partnership" is approved.

The deal excludes EFG-Hermes' private equity business and its stake in the Lebanese lender Credit Libanais. Planet IB says QInvest's bid will cherry-pick the best of EFG-Hermes' assets and leave the rest to "wither".

Shahzad Shahbaz, the chief executive of QInvest, declined to comment.

At the bank's extraordinary general meeting on Saturday, EFG-Hermes shareholders voted to approve the QInvest deal, saying Planet IB's offer lacked legal commitments and no proof of financing to complete the deal.

A spokesman for Planet IB said the group would appeal the decision with the Egyptian Financial Supervisory Authority.

Dubai Financial Group, an arm of a holding company owned by Dubai's ruler, is the biggest single shareholder in EFG-Hermes with an indirect holding of 18 per cent. Representatives for Dubai Financial Group declined to comment.

A spokesman for the Abu Dhabi Investment Authority (Adia) declined to comment. Adia owns about 8 per cent of the company's shares, and Sanjeev Doshi, the fund's head of equity opportunities, is an independent director on EFG-Hermes' board.

A vote on the Planet IB bid was not tabled at the meeting because of lack of clarity over legal commitments and the source of the bid's financing.

"No proof to availability of funds has been presented to the company nor any information about the identity of the investors who will provide the necessary funds for the tender offer," said Mona Zulficar, EFG-Hermes' chairwoman.

Planet IB is seeking to buy out EFG-Hermes amid a mire of accusations of graft, which saw the bank's co-chief executives and a former chief executive charged last week with illicit profiteering from the bank's 2007 sale of Al Watany Bank to National Bank of Kuwait.


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